A man bought a horse for £20 and gave in payment a cheque for £30. The horsedealer persuaded a shopkeeper to change the cheque for him, and the buyer, having received his £10 change, rode off on the horse and was not seen again. Later the cheque was found to be valueless, and the horsedealer had to refund the shopkeeper the amount he had received. The horsedealer had himself bought the horse for £10. How much did the horsedealer lose altogether?

(1) Nothing. (2) £20. (3) £10. (4) £30. (5) £40.

I think the horsedealer actually lost 50 pounds. He has to repay the shopkeeper 30, he expected to make/earned 10 profit, and he doesn’t have the horse, so he lost what he paid for it, which was another 10.

Plus the 10 in change he gave the buyer, making it 60 all up?
In the end, he expected to receive 30 for the cheque, but instead had to pay 30. If he discovered it was worthless before giving it to the shopkeeper, then he would have been out 30, this way he’s still out by that 30 but is then out by an additional 30 that he had to pay the shopkeeper?

spoiler £40

10 to purchase the horse, and 30 paid to the shopkeeper.[/spoiler]

Am I dense, or are his real losses not 40? 10 for the horse he no longer has, and 30 for the check he paid back.

I disagree. If he invested 10 to build the horse up, then yeah, he’s out 20 for the horse, but merely finding someone willing to pay him 20 doesn’t change the cost of the horse, to him, from 10.

Remember that when they cashed the check, he gave 10 to the horse thief and put 20 in his pocket. So he has to take that 20, add 10 of his own, and pay the shopkeeper back. That makes his total loss 20.

[spoiler]£20.

He gets £30 from the shopkeeper, and later has to give it back, for a net zero. The losses are the £10 he paid for the horse and the £10 he gave in change.[/spoiler]

10 that he gave to the buyer and then had to make up when the shopkeeper wanted his 30 back.
10 that was his expected profit on the horse.
How does the 10 he paid for the horse come into it? Isn’t that a sunk cost?
Anyway, total is 20.

Also, he should have known better when the buyer said he was from Nigeria.

(ignore this, and my post above, didn’t read the question properly )

£30 to shopkeeper + £10 or £20 value of horse = £40 or £50

Depends if the horse is worth £10 or £20 now. It may still only be worth £10 but the scammer happily “paid” £20 to get away with it.

Shopkeeper - expected balance sheet:

# Cost of horse: -£10 Revenue for horse: +£20

Total: +£10

Actual balance sheet:

# Cost of horse: -£10 Revenue from cheque cashed by shopkeeper: +£30 Change to buyer: -£10 Repayment to shopkeeper: -£30

Total: -£20

So one could argue he’s lost £30 since he didn’t get the expected profit, but as far as the hard figures are concerned, he’s only lost £20.

I’m with the £20 crowd. Let’s assume the unfortunate horse dealer started out with £20 in his pocket.

-£10 to buy the horse = £10
+£30 to sell the horse = £40
-£10 change to the thief = £30
-£30 returned cheque fees = £0

Ergo, loss of £20. QED.

Yeah, I was wrong earlier, I think it is either £20 or £30 depending on the value of the horse.

The shopkeeper ends up even.
The scammer leaves with the horse and £10.
Therefore the seller has lost £10 plus the value of the horse (£10 or £20).

(In my earlier post I’d forgotten the £20 he’d received for the horse in the original transaction)

Bah, it is indeed £20.

``````
Thief	Horsedealer	Shopkeeper
Initial					0	100		100
Sell horse - Receive cheque		0	90		100
Sell horse - Check to Shopkeep		0	90		100
Sell horse - Exchange from Shopkeep	10	110		70
Refund Shopkeep				10	80		100

``````

It doesn’t require any thought really. The shopkeeper loses nothing. The thief gains the horse plus a tenner. So the trader loses exactly the same. Since the horse cost him a tenner he lost 20.

That’s what I just said!

This is exactly right except that losing the horse doesn’t just cost him the opportunity to recuperate the 10 pounds spent, it also costs him the opportunity to acquire a profit. So the total loss is 20 pounds plus the expected profit margin on the re-sale of the horse, which we do not know, but given the limited facts of the problem is probably meant to be 10 pounds. So 30 pounds.

Without looking at the other responses:
The dealer is out either \$20 wholesale or \$30 retail.

\$10 in cash to the thief
\$10 wholesale cost of the horse
Plus whatever expenses were involved in acquiring, feeding and boarding the horse prior to the theft.

What the time he spent bringing a \$10 horse to market is worth is not something I can’t fairly assess.

As for the shopkeeper/dealer transaction, it doesn’t affect the calculations. They traded \$20, and the \$10 cash the thief stole passed through the skopkeeper’s hands, but ultimately came out of the the dealer’s pocket.

P.S. It wouldn’t shock me if my calculations are wrong.

The last few answers almost but not quite nail it

Clearly he is out 10 pounds plus the horse. But we do not know what the value of the horse is.

It is wrong to say definitively that the horse is worth 10 pounds since we don’t know whether the horsedealer paid precise market value: he may have got a good or bad deal on the horse at that price. Even if he paid perfect market value, the value may have moved either up or down in the meantime.

It is wrong to say that the horse is worth 20 pounds because we don’t know that the horse thief agreed to pay 20 pounds because that was market value: he may have agreed to pay 20 pounds only because he knew he was going to rip the horsedealer off so didn’t care if he paid over market value.

It is wrong to bring in the cost of keeping the horse: these are sunk costs and eat into profit but are not relevant to market value.

The question does not contain sufficient information to allow a perfectly accurate answer except “ten pounds plue the value of the horse at the time of the transaction”.

The horsedealer was given a check for £30 which he accepted at face value, but turned out to be worthless; then he had to make good on it to the shopkeeper. He’s out £30.

The rest of the story is just window dressing.