You decide you will buy a stock only if it shows an overall increase over the next 30 days. The first 10 days, it has an average daily increase of 0.30. The next 10 days it has an average daily decrease of 0.45. The last 10 days, it has an average daily increase of 0.25
a. How much did the stock change over the first 10 days? My answer is that the stock increased by $0.30 more
B. How much did the stock change over the next 10 days? My answer is that the next 10 days the stock decreased by $0.45
C.How much did the stock change over the last 10 days? My answer is that the stock increased by $0.25.
D. How much did the stock change altogether?
My answer is since it started of with $0.30 than it decreased with 0.45, I subtracted it and got -0.15, then I added 0.25 and got 0.1
E. Should you buy the stock? I'm not really sure about this one
I just need someone to tell me if I'm wrong or right. If I'm wrong I will like it if anyone will explain it to me. Thanks
(a) It increased by $0.30 each day for 10 days, or an increase of $3.00
(b) Over the next 10 days, it decreased by 10*0.45 = -$4.50
(c) The last 10 days, it changed by 10*.25 = $2.50
(d) You correctly came up with a total change of 0.1 but that is correct only because each period was the same length. If there had been different lengths of time, the result would have been different. The average daily change over the full 30 days is (total change)/(no. days) = $1.00/30 = $0.033/day.
(e) Since the net change was positive, it appears to be a good buy. However, you have to consider taxes and commissions, so it might not have been the best use for your money. On the other hand, it depends on the stock price.
If it was $IBM, at $150/share, a net increase of $1.00 isn't much.
If it was a penny stock, trading at $0.75/share, then the change is a significant percentage.
It also depends on how many shares you're trading. A huge number of shares might affect your decision.
Also, the stock seems to be bouncing around, so I'd steer clear of it, unless this is just a wiggle in what appears to be a long-term increase.
Stock trading can get complicated!!