SAT Math Multiple Choice Question 714: Answer and Explanation
9. After its initial offering, the price of a stock increased by 20% in the first year, decreased by 25% in the second year, then increased by 10% in the third year. What was the net change in the stock price over the entire three-year period?
- A. It increased by 5%.
- B. It increased by 1%.
- C. It decreased by 1%.
- D. It decreased by 5%.
Correct Answer: C
Problem Solving (percentages) MEDIUM-HARD
Let p = the initial price per share of the stock. After the first year, its price increased by 20%, so its price was (1.20)p. After the second year, this price declined 25%, so its price was (0.75)(1.20)p. After the second year, this price increased by 10% so its price was (1.10)(0.75)(1.20) p = 0.99p, which means that overall the price decreased by 1%.