How good is your money maths?

Former_MSE_Debs

Poll started 3 Sep 2013

Every few years we run this poll to see how good people are at figuring out a basic, but not straightforward money sum.


Which of these stock market scenarios gives the best return?

Vote in this week's poll

Did you vote? Why did you pick that option? Are you surprised at the results so far? Have your say below clicking reply to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide .

To see the results from last time, click this.

MSE_Martin

[FONT=&quot]Here's my quick explanation[/FONT]:

The answer is C. The market stays the same.
First let me give you the numerical answer:

Option A. Rises 10%/year for 4 years then drops 10%/year for 4 years. END RESULT: 96% of the start value.
Option B. Falls 10%/year for 4 years then rises 10%/year for 4 years. END RESULT: 96% of the start value.
Option C. The market stays the same. END RESULT: 100% of the start value.
Option D. All the above answers are equal. NOT TRUE AS A, B & C produce different answers.

Now on to why:

The most important thing to understand is that if you add X% on a value then take X% off – you'll always end up with less than you started with.

If algebra is confusing lets try again this time with an example. You have £100 and get 20% on it. Now you've £120, but then you take 20% off that and (as 20% of £120 is £24) you've only £96 left.

The reason this works is because you're taking 20% off a bigger number than you're adding 20% too.

And this is commutative (it works both ways round) so let's do it the other way. You start with 100 and take 20% off, now you've £80, then you add 20% to £80 and you get £96. This is because again you're adding the 20% to a smaller number than you're taking it off.

Hope that helps. If you're not sure try it on a calculator yourself.

Click reply to discuss

bsms1147

Well played, Martin, well played.

I got the right answer but had to maths my way there. Quite counter-intuitive until you explain it like you did.

Kaz2904

Oh. I was wrong then!

Gabs27

I voted C
as using 1 as a base figure A and B give a result of 0.96 whereas C give 1

Comyface

I got there working it out without numbers, kind-of like you explained. Wouldn't have been surprised if I'd been wrong, though.

Liked giving my rusty-maths brain a workout

b_e_a_r

I had to do a small bit of work in Excel to get the answer and was surprised. I realised that if the amount is changing then the amount of the 10% is changing and that will have an effect. I expected this to result in a higher result. Having done the maths it does make sense.
Will give this to some of my more able year 6 pupils near the end of the year and see what they think.

zagfles

If you can do a bit of simple algebra it's obvious really:

(1+x)*(1-x) = 1-x^2

It's even more obvious if you use 100% instead of 10%

dgwebster

Whoop whoop. Instinctively got the right answer straight away, but my job is massively statistical anyway so would have been an embarressment to have gotten it wrong.

FattyBettyBoo

I can't highlight the answer on my iPad ... Which was right?

too_much_debt

Yes, I got it right!