A well-known network of personal health and beauty stores, Lala Beauty offers a wide selection of items for infant, skin, and personal care. It is a corporation that is listed on the Hong Kong Stock Exchange. Assume that a business will always make a profit of $1,000,000 and that all of this profit will be paid out as dividends to shareholders. Additionally, the business has issued 200,000 shares to stockholders overall.

Question:

(a) What will be the price of each share if the interest rate is 5% per annum?

(b) Alice is one of the investors in the stock market. Originally, she has no intention of buying Lala Beauty’s shares. However, after its share price has risen quite sharply one morning, she decides to buy some shares. Is Alice’s action an exception to the law of demand?

(c) Boris is a speculator who tries to ‘buy low and sell high to make a profit. If he succeeds in making a profit out of his speculative activities, by using demand and supply diagrams, show how will his actions affect the demand for OR supply of shares in the stock market during 

(i) periods when he thinks current prices are relatively low? 

(ii) periods when he thinks current prices are relatively high? Besides, do you think speculators (who are successful in making money) will make share prices more stable or less stable?