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The price of a stock is generally determined by supply and demand. For instance, if there are more people who want to buy a stock than people who want to sell it, the price will rise. This is because shares of that stock are more rare, and people are willing to pay a higher price for them. The opposite is also true. If there are a lot of shares of stock for sale but no one wants to buy them, the price will quickly drop. Because of these factors, the stock market can appear to have great fluctuations.
Understanding supply and demand is easy. What is difficult to comprehend is what makes people like a particular stock and dislike another stock. Basically, the price movement of a stock indicates what investors feel a company is worth – but don't equate a company's value with the stock price, as that is not always an accurate indicator.
If the price of a certain stock increased by 1/5 during the first month and then decreased by 1/4 during the second month, what was the ratio of the stock price at the end of the two months to the original price?
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