This is a bit tricky, it's all in the details.

I suspect you read the question like this:

Merchant purchases jacket for $60

Merchant prices jacket at 25% more than purchase price. 20% more than $60 = $75

Merchant sells jacket at %20 off. 20% off of $75 = $60

Merchant makes $0 because he bought and sold at $60

But the question actually reads like this:

Merchant purchases jacket for $60

Merchant prices jacket at purchase price +

25% of selling price. Note the difference.

Let's break this down.

Selling price = purchase price + 25% of selling price

75% of Selling price = purchase price

Selling price = $60/75% = $80

Now we can finish the question...

Merchant sells jacket at %20 off. 20% off of $80 = $64

Merchant makes $4 because he bought at $60 and sold at $64.

I hope that helps!

_________________

Bhavin Parikh

Magoosh Test Prep