A man buys a horse for $60. He sells it for $70.
He then buys the horse back for $80. And he sells the horse for $90.
In the end, how much money did the man make or lose? Or did he break even?
Many people are unable to figure out the correct answer. Can you?
Answer To Buying And Selling A Horse Riddle
The short answer is the man profited $20. The man makes $10 each of the two times he sells the horse, for a profit of $20.
The answer can be verified by accounting for what the man has in each transaction.
Step 1: buys a horse for $60. The man is -$60 of cash from his starting point.
Step 2: sells the horse for $70. The man gets $70, so he is a net -$60 + $70 = $10 of cash.
Step 3: buys the horse for $80. The man spends $80, which means he is a net of $10 – $80 = -$70 cash.
Step 4: sells the horse for $90. The man gets $90, which means he is a net of -$70 + $90 = $20 cash.
In the end the man has $20 more than he started with.
(Update) Why were people confused?
I received a request to elaborate common errors for solving the problem. Generally it seems people were confused about which numbers to add/subtract, and also people got confused since it was the same horse in each transaction. If the first sale and second sale were for different items then people had no trouble–that’s probably a good example of a mental bias and a way to correct the bias.
In particular, people came up with answers of “broke even” and “gained $10.” The “broke even” appears to be because people lost track of numbers, or did not know which numbers to add and subtract (for example 60 + 90 – 80 – 70 = 0). The “gained $10” comes from the fact the person gained $10 in the first sale. But then to buy the horse for $80, the person only has $70 and needs to borrow $10–making the person even. After the sale at $90 the person nets $10 and gains $10. The mistake here is accounting only after the first sale–the person does gain $10 after the second sale, and this adds to the $10 from the first sale.