Question

Using the theory of portfolio allocation, state why you would be more willing or less willing to buy a share of IBM stock if you

win $1 million in the state lottery; (5 points)

-expect that stock prices will become less volatile; (5 points)

-expect the price of IBM shares to decrease over the next year; (5 points)

Answer 1

ans.....
a) If is win $1million in the state ;ottery ; then i would be more wiliing to buy a share of IBM stock.because i have a capital to invest and in return i can use to accumulate more capital.
b) I would less willing to buy a share of IBM stock if i expect that stock price will become more volatile because more volatile of stock means more risk is associated with them. in future the price either go up or go down . so therefore we want to minimize the risk therefore, i would less willing to buy a IBM stock.
c) i would more willing to buy a share of IBM stock if i expect that the price of IBM shares increases over next year because, if i invest today in IBM share at lowest price and in next upcoming year the price will rises therefore the profits will doubles. so i more willing to buy a share of IBM stock today at lower price and sell them in future at higher price.