A stock drops 20% then gains 25%. What is the net change?

A stock drops 20% then gains 25%. What is the net change?

Approach: Calculate sequentially using a base of 100.

0% change. 100 * 0.8 = 80. 80 * 1.25 = 100.

Follow-up: What if it gains 25% then drops 20%?

Key concepts: percentage compounding, relative change.