If the fitted annual trend for a stock price is y_t = 27e^0.213^t, then: A)the slow growth rate is not very attractive. B)the stock price seems to be approaching an asymptote. C)the stock is probably undervalued in today's markets. D)the stock would more than double every four years.

Question

Quizplus · Accepted Answer

The trend equation is in the form of y = ab^x where a = 27e^10.213 and b = e^0.213. The value of b is greater than 1, which indicates exponential growth. Therefore, the stock price would more than double (i.e., increase by more than 100%) every four years. This suggests that the stock has a high growth potential and may be a good investment opportunity.

If the Fitted Annual Trend for a Stock Price Is