Money maths - how good are you? Poll discussion

edited 30 November -1 at 1:00AM in Money Saving Polls
27 replies 17.2K views
edited 30 November -1 at 1:00AM in Money Saving Polls
Money maths - how good are you? This is a repeat of a poll I did back in 2005, to see how good you are at figuring out a basic, but not straightforward money sum. Which of the following gives the best return? (correct answer in next week's e-mail) The stockmarket....

A. rises 5% a year for 4 years then drops 5% a year for 4 years
B. drops 5% a year for 4 years then rises 5% a year for 4 years
C. stays the same
D. all are equal

Did you get it?

FOR THE RESULT AND ANSWER: CLICK HERE
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Replies

  • According to my sums both A and B result in converting £100 into £99. So C must be the best bet - £100 stays at £100. That is, ignoring commission charges!
  • reehsetinreehsetin Forumite
    4.9K Posts
    i think its a,
    Yes Your Dukeiness :D
  • katecheshirekatecheshire Forumite
    229 Posts
    Part of the Furniture Combo Breaker
    ✭✭
    with A, if you were canny and worked on the principle that what goes up must come down, you would take your profits at the top of the market. So A offers the best potential but C is no profit, no loss, no fun!!
  • trf197trf197 Forumite
    26 Posts
    Part of the Furniture Combo Breaker
    Definitely "stays the same is the best":

    (A and B are the same sum in a different order - it doesn't matter what order you multiply)

    Case A - rises first then falls:

    original x 1.05 x 1.05 x 1.05 x 1.05 x 0.95 x 0.95 x 0.95 x 0.95 = original x 0.9975 (1/4 percent fall from original)

    Case B - falls first then rises:

    original x 0.95 x 0.95 x 0.95 x 0.95 x 1.05 x 1.05 x 1.05 x 1.05 = original x 0.9975 (1/4 percent fall from original)

    trf197 (Maths Teacher)
  • denny250denny250 Forumite
    64 Posts
    trf197 yep thats the way i did it
    Received £4541 reclaimed from Natwest :j:T
  • haliahalia Forumite
    450 Posts
    stays the same is the best bet if you have to leave your cash in for the whole 8 years.
    If you can take it out at any point then obviuosly you go for A

    what about inflation? real return on money if you invest £100, 8 years later it is still £100 but its buying power has decreased
    DEBT: £500 credit card £800 Bank overdraft
    £14 Weekly food budget



  • CCCeleCCCele Forumite
    218 Posts
    I'd go for e) put the money in the top savings account at 6.05%.
  • BabblerBabbler Forumite
    3.1K Posts
    1,000 Posts Combo Breaker
    ✭✭✭✭
    Yup - C is the answer IMHO
    Being bored is so boring Im bored of it... :rotfl:
  • Yep - C.

    The trick being that you're not gaining and losing 5% of the same thing:

    If you gain 5% and then lose 5%, you're losing 5% of a bigger amount than your original stake, so you lose more than you gained.

    On the other hand:

    If you lose 5% and then gain 5%, you're gaining 5% of a smaller amount than your original stake, so you gain less than you lost.

    Either way, you end up worse off than just keeping your original stake
  • BigglesBiggles Forumite
    8.2K Posts
    ✭✭✭✭
    But it's loss of 1% over the eight years, surely?

    £100
    1yr 105
    2yr 110.25
    3yr 115.76
    4yr 121.55
    5yr 115.47
    6yr 109.70
    7yr 104.21
    8yr 99.00

    And similar for option B

    Whichever, am I alone in finding it worrying that less than 1/3rd of people got the right choice (at the time I voted)?
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