Bill, Jim, and Shelly Are All Interested in Buying the Same

question 56

Multiple Choice

Bill, Jim, and Shelly are all interested in buying the same stock that pays dividends. Bill plans on holding the stock for 1 year. Jim plans on holding the stock for 3 years. Shelly plans on holding the stock until she retires in 10 years. Which one of the following statements is correct?

• A) Bill will be willing to pay the most for the stock because he will get his money back in 1 year when he sells.
• B) Jim should be willing to pay three times as much for the stock as Bill will pay because his expected holding period is three times as long as Bill's.
• C) Shelly should be willing to pay the most for the stock because she will hold it the longest and hence will get the most dividends.
• D) All three should be willing to pay the same amount for the stock regardless of their holding period.

---

Definitions:

Sample Size

The number of observations or datapoints collected in a subset of a larger population.

Confidence Coefficient

The degree of certainty or probability (expressed as a percentage) that the confidence interval contains the true parameter value.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the data points are.

Confidence Interval

A range of values, derived from sample statistics, that is believed to contain the true population parameter with a certain level of probability.