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5. Answer all parts (a) - (d) of this question (11 marks). Person A, Person B and Person C own stock in the same company.
5. Answer all parts (a) - (d) of this question (11 marks). Person A, Person B and Person C own stock in the same company. All of them are loss averse and have the same value function: v(x)=x for gains and v(x)=2x for losses. The stock's price is shown in the graph below (a) [ 3 marks] Person A bought the stock in November and uses the purchase price as their reference point. Which price is their reference point? If you ask them, by how much would they say that their value changed in February? (b) [2 marks] Person B also bought the stock in November, but they use the peak price as their reference point. Which price is their reference point? If you ask them, by how much would they say that their value changed in February? (c) [2 marks] Person B knows all stock prices from October onward. Which month should Person B use as reference point in order to maximize their value? (d) [4 marks] Person C bought the stock in January. They expect to derive a value of at least +5 in April as compared to their reference point of 80 . What is the minimum price that the stock will need to have in March to fulfill C's expectations
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