A share of stock loses 5% in value and then gains 5% . How does its ending value compare with its initial value?
Ending value is slightly lower.
For example, $100 - 5% = $100 - $5 = $95
But 5% gain from $95 will not be as much.
x(.95)(1.05)/x
= .95(1.05) = .9975
It will be 99.75% of its initial value
To find out how the ending value of a share of stock compares with its initial value after losing 5% and then gaining 5%, you can follow these steps:
1. Assume the initial value of the share of stock is 100 units (you can choose any value, as long as you stay consistent throughout the calculation).
2. Calculate the loss of 5% by multiplying the initial value (100 units) by 0.05, which equals 5 units. Subtract this loss from the initial value: 100 - 5 = 95 units.
3. Calculate the gain of 5% by multiplying the new value (95 units) by 0.05, which equals 4.75 units. Add this gain to the new value: 95 + 4.75 = 99.75 units.
By following these steps, you can determine that the ending value of the share of stock is 99.75 units, which is slightly less than its initial value of 100 units.