Jenny crashes a $50,000 cost car while taking her test and reduces its value by 60%. Fortunately, she can claim cash insurance for the damage caused and is paid back 75% of the value lost. The car is fixed for a cost of $10,000 and later sold for $47,500. How much profit or loss was made on the sale of the car?

Answer Choices

Correct answer marked below

$20,000 profit

$2,500 loss

Correct

$17,500 loss

$0 profit / loss

$10,000 profit

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Explanation

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Official Explanation

Official

The car lost 60% of $50,000 in value, or $30,000.

Insurance repaid 75% of the value lost:

\frac{3}{4} \times 30,000 = 22,500

.

Total money spent: $50,000 (purchase) + $10,000 (repairs) = $60,000.

Total money received: $22,500 (insurance) + $47,500 (sale) = $70,000.

Net over all events: $70,000 - $60,000 = $10,000 profit.…

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What this question tests

What it tests

Your ability to convert between fractions, ratios, and decimals and to reason proportionally.

Common trap

Cross-multiplying incorrectly or mixing up the ratio parts — a part:part ratio is not a fraction of the whole.