How good is your money maths?

edited 3 September 2013 at 6:41PM in MoneySaving polls
41 replies 18K views
Former_MSE_DebsFormer_MSE_Debs Former MSE
890 Posts
edited 3 September 2013 at 6:41PM in MoneySaving polls
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?

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.


  • edited 3 September 2013 at 6:53PM
    MSE_MartinMSE_Martin Money Saving Expert MoneySaving Expert
    8.3K Posts
    edited 3 September 2013 at 6:53PM
    [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
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
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  • bsms1147bsms1147 Forumite
    2.3K Posts
    Tenth Anniversary 1,000 Posts Name Dropper Combo Breaker
    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.
  • Kaz2904Kaz2904 Forumite
    5.8K Posts
    Mortgage-free Glee!
    Oh. I was wrong then!
    Debt: 16/04/2007:TOTAL DEBT [strike]£92727.75[/strike] £49395.47:eek: :eek: :eek: £43332.28 repaid 100.77% of £43000 target.
    MFiT T2: Debt [STRIKE]£52856.59[/STRIKE] £6316.14 £46540.45 repaid 101.17% of £46000 target.
    2013 Target: completely clear my [STRIKE]£6316.14[/STRIKE] £0 mortgage debt. £6316.14 100% repaid.
  • I voted C
    as using 1 as a base figure A and B give a result of 0.96 whereas C give 1
  • ComyfaceComyface Forumite
    668 Posts
    Part of the Furniture 500 Posts Combo Breaker
    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 :)
    Are the words 'I have a cunning plan' marching with ill-deserved confidence in the direction of this conversation? :cool:
  • 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.
  • zagfleszagfles Forumite
    19.4K Posts
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    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% ;)
  • 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.
  • I can't highlight the answer on my iPad ... Which was right?
    I seldom end up where I wanted to go, but almost always end up where I need to be
  • too_much_debttoo_much_debt Forumite
    3.2K Posts
    Part of the Furniture 1,000 Posts Combo Breaker
    Yes, I got it right!
    Sealed Pot Challenge #016
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