An investor trading through a discount stock broker that charges $10.00 Dollars per transaction bought 200 shares of Vola Tile Corporation at $50.00 Dollars per share. The stock quickly increased in value by 50%, but then lost 40% of its value. The investor sold the stock. How much money did the investor gain or lose?
The cost of 200 shares at $50.00 Dollars each is $10,000.00 Dollars.
The 50% gain on $10,000 is $5,000, making the new total $15,000.00 Dollars.
The 40% loss on $15,000 is $6,000, reducing the total amount to $9,000.00 Dollars.
This is a $1000.00 Dollar loss, plus $10 Dollars for the Buy transaction, and $10 Dollars for the Sell transaction.
The investor lost a total of $1020.00 Dollars.
It seems counterintuitive that the investor should lose money when the percentage of the loss is less than the percentage of the gain. However, the percentage of the loss is calculated on a bigger amount than the percentage of the gain.