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Question of the Day
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Answer: 50%
It's the math of investment returns. Let me explain:
Your investment was worth $100. After a 33% drop, your investment is worth $67. In order to get back to $100, it has to rise $33 in value which would be a 50% increase from its current level of $67.
No additional questions.
Click here for the ready-to-go slides for this Question of the Day that you can use in your classroom.
Behind the numbers (Zachs):
Big Losses Hard to RecoupThe math of percentages shows that as losses get larger, the return necessary to recover to break-even increases at a much faster rate. A loss of 10 percent necessitates an 11 percent gain to recover. Increase that loss to 25 percent and it takes a 33 percent gain to get back to break-even. A 50 percent loss requires a 100 percent gain to recover and an 80 percent loss necessitates 500 percent in gains to get back to where the investment value started.
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Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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