An investor has purchased one hundred shares of oil stock every December for the past five years. In every case the value of the stock has appreciated by about 15 percent a year, and it has paid regular dividends of about 8 percent a year on the price at which she bought it. This December she decides to buy another hundred shares of oil stock, reasoning that she will probably receive modest earnings while watching the value of her new purchase increase over the years.
a. Suppose that she had always purchased stock in eastern oil companies before, and plans to purchase stock in an eastern oil company this year, too.
b. Suppose that she had purchased oil stocks every December for the past fifteen years, instead of for only fi ve years.
c. Suppose that the oil stocks previously purchased had gone up by 30 percent a year, instead of only by 15 percent.
d. Suppose that her previous purchases of oil stock had been in foreign companies as well as in eastern, southern, and western U.S. oil companies.
e. Suppose she learns that OPEC has decided to meet every month instead of every six months.
f. Suppose she discovers that tobacco stocks have just raised their dividend payments.