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?
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).