You Own Two Stocks, One Whose Value Depreciated Drastically in the Last

question 82

Multiple Choice

You own two stocks, one whose value depreciated drastically in the last week, and one whose value increased by 80% last week. If you are forced to sell one, which one would you pick?

• A)The one that increased in value, to take advantage of the capital gain.
• B)You are indifferent because you invest in the market for fun, not income.
• C)The past performance is irrelevant for this decision.
• D)The one that has fallen in value, to salvage at least a part of its value.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset that allocates an equal amount of depreciation each year over the asset's useful life.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decline in value over time.

Accelerated Depreciation

A method of calculating the depreciation of an asset that assumes the asset will lose value more quickly in its initial years of use.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly, resulting in equal depreciation expenses per year.