If you make an investment that earns 10% the first year and loses 10% the second year, what is your total 2-year return?
A)+1%
B)0%
C)+5%
D)-1%

Question

Quizplus · Accepted Answer

Let's say you invest $100. 
At the end of year 1, you will earn a 10% return, which is $10 , making your total $110. 
But at the end of year 2, you will lose 10% of $110, which is $11, leaving you with $99. 
So, you have lost 1% over the two years. 
Thus, the correct answer is D, -1%. If you invested $100, your return after the first year would be $10 and your investment would be worth $110. 
If you lost 10% the second year, then you would lose $11 (10% of $110) leaving you with $99. 
This means you lost $1 overall, which is a -1% return.

If You Make an Investment That Earns 10% the First