Course 1 May 2000 Multiple Choice Exams - Society of Actuaries
Course 1 May 2000 Multiple Choice Exams - Society of Actuaries
Course 1 May 2000 Multiple Choice Exams - Society of Actuaries
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29. An investor buys one share <strong>of</strong> stock in an internet company for 100 . During the first<br />
four days he owns the stock, the share price changes as follows (measured relative to the<br />
prior day’s price):<br />
Day 1 Day 2 Day 3 Day 4<br />
up 30% down 15% unchanged down 10%<br />
If the pattern <strong>of</strong> relative price movements observed on the first four days is repeated<br />
indefinitely, how will the price <strong>of</strong> the share <strong>of</strong> stock behave in the long run?<br />
(A) It converges to 0.00 .<br />
(B) It converges to 99.45 .<br />
(C) It converges to 101.25 .<br />
(D)<br />
It oscillates between two finite values without converging.<br />
(E) It diverges to ‡ .<br />
<strong>May</strong> <strong>2000</strong> 31 <strong>Course</strong> 1
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