Suppose You Buy 100 Shares of Abolishing Dividend Corporation at the Beginning

question 2

Multiple Choice

Suppose you buy 100 shares of Abolishing Dividend Corporation at the beginning of year 1 for $80. Abolishing Dividend Corporation pays no dividends. The stock price at the end of year 1 is $100, $120 at the end of year 2, and $150 at the end of year 3. The stock price declines to $100 at the end of year 4, and you sell your 100 shares. For the four years, your geometric average return is

• A) 0.0%.
• B) 1.0%.
• C) 5.7%.
• D) 9.2%.
• E) 34.5%.

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Definitions:

Elastic

Describes a situation where the quantity demanded or supplied of a good or service is sensitive to changes in its price.

Intensive Use

Utilization of resources or land to their maximum potential to achieve high output or productivity.

Marginal Cost

The investment needed to manufacture one more unit of a product or service.

Knitted Caps

Hats made by intertwining yarn or thread in patterns by hand or with knitting needles.