Al P. answered 12/18/17
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When you see 'of' think multiplication.
40% is exactly the same as 40/100 = 4/10 = 2/5
He sold 2/5 of 3/8 of the ship, which is: (2/5)*(3/8) = 6/40 = 3/20 of the ship. <——<< Fraction sold
Thus, at after selling 2/5, he still owned (3/8)*(3/5) = 9/40 of the ship. <——<< Fraction retained
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The last result can be sanity-checked: the man owned 3/8 = 15/40 of the ship to begin with. He sold 6/40
leaving him with (15-6)/40 = 9/40.