Problem-Solving and Data AnalysisHardRaising and lowering by the same percentage
Problem-Solving and Data Analysis practice question
A share price rises by 25% one week and falls by 25% the next. Compared with its starting price, the share price at the end of the second week is
- A. 6.25% lower.Correct
- B. the same.
- C. 6.25% higher.
- D. 25% lower.
Answer: A. 6.25% lower.
Multiply: 1.25 × 0.75 = 0.9375, which is 6.25% below the start. The 25% fall is taken from the higher price, so it removes more than the rise added.
Why the other answers are wrong
- B. the same.
- The percentages cancel only if taken of the same base; they aren't.
- C. 6.25% higher.
- The net effect is a loss, since the fall acts on a larger amount.
- D. 25% lower.
- 25% lower ignores the rise entirely.
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