You invest $1,000 in a mutual fund for two years. The mutual fund earned 25% in the first year and lost 10% in the second year. How much is your mutual fund worth at the end of the second year?
a) $1,150
b) $1,375
c) $1,125
d) $1,250
The correct answer is c).
If you invest $1,000 and earn 25% you will now have $1,250 at the end of the first year ($1,000 times (1+0.25)=$1,250). Now you have $1,250 and earn –10% in the second year, so you are now left with $1,125 at the end of the second year ($1,250 times (1-.10)=$1,125).
Hot Definitions
  1. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  2. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
  3. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  4. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
Trading Center