Understanding Stock Price Changes

The video explains how a stock price changes when it drops by 10% and then gains 10%. It clarifies that the stock price does not return to its original value due to the percentage being applied to different amounts. Using a $100 stock as an example, the video shows that after a 10% drop, the price becomes $90, and after a 10% gain, it becomes $99. This demonstrates that the stock is still down by 1% from its original price, highlighting a common misconception about percentage changes.

What happens to a stock price after a 10% drop followed by a 10% gain?

• It returns to the original price.

• It increases by 1%.

• It decreases by 1%.

• It remains unchanged.

If a stock price is $100 and it drops by 10%, what is the new price?

• $90

• $95

• $85

• $80

How do you calculate a 10% decrease on a stock price?

• Multiply the price by 0.9

• Subtract 10 from the price

• Add 10 to the price

• Multiply the price by 0.1 and subtract from the original price

After a 10% drop, if the stock price is $90, what is the price after a 10% gain?

• $90

• $99

• $110

• $100

How do you calculate a 10% increase on a stock price?

• Subtract 10 from the price

• Multiply the price by 0.1 and add to the original price

• Add 10 to the price

• Multiply the price by 1.1

What is the final stock price after a 10% drop and a 10% gain if it started at $100?

• $100

• $99

• $101

• $98

What is the percentage decrease in stock price after a 10% drop and a 10% gain?

• 5%

• 2%

• 0%

• 1%

Why does the stock price not return to its original value after a 10% drop and a 10% gain?

• Because the gain is calculated on the reduced price

• Because the drop is larger than the gain

• Because the gain is calculated on the original price

• Because the drop is smaller than the gain

Does the concept of a 10% drop followed by a 10% gain apply to any starting stock price?

• No, it only applies to $100

• No, it varies with different prices

• Yes, it applies to any starting price

• Yes, but only for prices above $50

What is the key takeaway from the stock price change example?

• Stock prices always return to the original value

• A 10% gain is always beneficial

• A 10% drop and gain results in a net decrease

• Stock prices are unpredictable