Can you figure it out?

joffmeister

Personally I'd say you'd get the best returns from a)

But that's assuming you take your money out halfway through and put it in a savings account

Jon_3-2

yep jjay, them's the sums I got too. The results of a) and b) are the same, leaving c) as the best option.

buffers

I came to the same conclusion :j

bigpat

A&B both cost you money, £49.01 if you started with £1000, so C is the best option. So stuffing fivers in my mattress IS the best option after all. Granny was right!!

Rainy_2

I'm with Joffmeister - I picked a) just because as soon as I knew it was down 10% in the first year I'd grab the money and run!

jmcall10

Answer is B (provided you know this information)

For those picking A) because they would withdraw once they knew it was going to go down makes no sense.

it would be best to invest as soon as the first 5 years are over then invest as your money is nothing but growing for the next five.

this is obviously only if you know these facts and dont invest straight away.

If you have to invest straight away then D is you answer because money doenst increase in value over the 10 year term. there is a formula for waht it would be but cant get it at hand.

If i am talking mince please let me know :rolleyes:

david78

40079 wrote:

What I'm struggling to rationalise how both a and b come to the same (lower) answer, therefore c is best.

and

40079 wrote:

If the stockmarket rose and fell in alternate years by 10% or fell and rose by 10% you also get to the same answer!!

Because 1.1 * 1.1 * 1.1 * 1.1 * 1.1 * 0.9 * 0.9 * 0.9 * 0.9 * 0.9 =

0.9 * 0.9 * 0.9 * 0.9 * 0.9 * 1.1 * 1.1 * 1.1 * 1.1 * 1.1 =

0.9 * 1.1 * 0.9 * 1.1 * 0.9 * 1.1 * 0.9 * 1.1 * 0.9 * 1.1



The answer is c.

Big_Nige

jjay wrote:

A)

Start with £100
After 1 year: £110 (+10%)
After 2 years: £121 (+10%)
After 3 years: £133.10 (+10%)
After 4 years: £146.41 (+10%)
After 5 years: £161.05 (+10%)
After 6 years: £144.95 (-10%)
After 7 years: £130.45 (-10%)
After 8 years: £117.41 (-10%)
After 9 years: £105.67 (-10%)
After 10 years: £95.10 (-10%)



Start with £100
After 1 year: £90 (-10%)
After 2 years: £81 (-10%)
After 3 years: £72.90 (-10%)
After 4 years: £65.61 (-10%)
After 5 years: £59.05 (-10%)
After 6 years: £64.95 (+10%)
After 7 years: £71.45 (+10%)
After 8 years: £78.59 (+10%)
After 9 years: £86.45 (+10%)
After 10 years: £95.10 (+10%)

C)

Start with £100 and end with £100

D)

All are NOT equal

C gives you the best return. Unless my sums are wrong.....

I agree but there was no mention of dividends & we all know shares are not just a short term investment.

Jakemzuck

By my calculations it all depends HOW you decide to invest in the stock market.

If you invest a lump sum then c) is the correct answer... however if you invest an equal amount EVERY YEAR then the maths becomes a lot more interesting.

For example, lets say you have £1000 to invest. If you do it all in year one, then, as other posts have pointed out, in the case of a) or b) you will end up with £1000*0.951 = £951

In this case the correct answer is c)

...but if you decided to invest £100 every year over ten years then in case of a) the result is £765.11

but b) would leave you with £1265.13!!

so b) would be the correct answer.

...now, how did I work this out?

my sum for a) would be...

(((((((((((((((((((100*1.1)+100)*1.1)+100)*1.1)+100)*1.1)+100)*1.1)+100)*0.9)+100)*0.9)+100)*0.9)+100)*0.9)+100)*0.9)

...at least I think this is right (Excel seems to like it - try copying and pasting it in.)

and my sum for b) is

(((((((((((((((((((100*0.9)+100)*0.9)+100)*0.9)+100)*0.9)+100)*0.9)+100)*1.1)+100)*1.1)+100)*1.1)+100)*1.1)+100)*1.1)

...I'm sure some maths genius out there could express this a lot more elegantly, so now I'm faced with the question as to why I've wasted half an hour on this? How sad am I!!!!!!

However there is one useful lesson that can be translated to real life investment.... if you want a safe guaranteed return put your money in a bank!!!!!!!!

Jake

siva

I cant believe that no one has taken inflation into account at all and although c gives the best return (unchanged), it would be worth lot less due to the effect of inflation.

Monthly payments into investment or unit trust schemes are far better for those who either have no time or interest in investing directly into shares!

Siva