The Closing Price of a Company's Stock Tomorrow Can Be

question 129

Multiple Choice

The closing price of a company's stock tomorrow can be lower, higher or the same as today's closing price. Based on the closing price of the stock collected over the last month, on 25% of the days the closing price was higher than previous day's closing price, on 45% of the days it was lower than previous day's closing price, and on 30% of the days it was the same as previous day's closing price. Based on this information, the probability that tomorrow's closing price will be higher than today's is 25%. This is an example of using which of the following probability approach?

• A) a priori probability
• B) empirical probability
• C) subjective probability
• D) conditional probability

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Definitions:

Book Value

A financial metric that calculates the net asset value of a company's assets minus its liabilities, representing the shareholders' equity value in accounting terms.

Depreciation Expense

The portion of a fixed asset's cost allocated to expense across its useful life, reflecting the asset's consumption or decline in value.

Straight-Line

An approach where the expense of an asset is uniformly allocated across its lifespan to calculate depreciation.

Double-Declining-Balance

A depreciation technique that increases the standard rate of depreciation twofold, thus diminishing an asset's value at a faster pace.