Q14. - Algebra 2

Question

For exercise 13 and 14, use the following information.

Della has $1000 that she wants to invest in the stock market. She is considering buying stock in either Company 1 or Company 2. The values of the stocks at the ends of the last four months are shown in the tables below:

14. Do you think investment decisions should be based on this type of reasoning? If not, what other factors should be considered?

Step-by-Step Solution

Answer

No, past performance is no guarantee of future performance of a stock. Other factors that should be considered is companies earning data and how much debt they have.

Step-1 – Prediction equation for company 1 and 2.

Prediction equation for company 1 is $y=-1.63+27.45$

Prediction equation for company 1 is $y=0.38x+31.3$

Step-2 – Investment decisions.

The investment decisions should not be taken on the basis of past performance because past performance is no guarantee of future performance of a stock

Step-3 – Determine other factors.

Other factors that should be considered include the companies earning data and how much debt they have.