Suppose that your portfolio dropped in value by 30% last year but gained in value by 30% this year. Has your original portfolio value gained, lost or remained the same? If gained or lost, by what percent? If the loss and gain are reversed, that is, if your portfolio gained in value by 30% last year but lost in value by 30% this year, would the result be the same or different?
I have given this ‘puzzle’ to many friends and professionals. In most cases, the answer was: “The original value did not change. It remained the same.”
It is imperative that we do everything we can to help Americans young and old raise their numerical and statistical literacy so that they can calculate real-life problems using elementary arithmetic and statistics.
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