Question

you save $5,000.00 and invest 60% of it in stocks while leaving the rest in a savings account earning a 4.9% APR. The stock increases 9% in the first year and loses 4% of its value the second year. What is the total amount gained during the 2 years? What would the gain have been if all of the investment had been left in the savings account?

Answer 1

Amount invested in stocks
5,000×0.60
=3,000
after one year gains 9%
3,000×(1+0.09)
=3,270
After second year loses 4%
3,270×(1−0.04)
=3,139.2 amount after second year
So Stocks gained 139.2 (3139.2-3000)

Amount of saving account
5,000×0.40
=2,000
After 2 years
2,000×(1+0.049)^(2)
=2,200.802
So it gained 200.802 (2200.802-2000)

Total amount after 2 years
3,139.2+2,200.802
=5,340.002
Gained 340.002 (5340.002-5000)