A man decides to buy a nice horse. He pays $60 for it,
and he is very content with this strong animal. After a year, the value of the
horse has increased to $70 and he decides to sell the horse. But already a few
days later he regrets his decision to sell the beautiful horse, and he buys it
again. Unfortunately he has to pay $80 to get it back, so he loses $10. After
another year of owning the horse, he finally decides to sell the horse for $90. What is the overall profit the man
makes?
The man makes an overall
profit of $10 + $10 = $20. In the first
trade, the man buys the horse for $60
and sells it again for $70, so he makes
a profit of $10. In the second
trade, the man buys the horse for $80
and sells it again for $90, so he again
makes a profit of $10.