Question

Three weeks ago John bought stock at 491/4; today the stock is valued at 497/8. We could say the stock is performing at which of the following? A. Below par B. Above par C. Par equality D. On par

Answer 1

The correct answer on my test was Above Par

Answer 2

A. Below par.

Explanation:

We have been given that 3 weeks ago John bought stock at 491/4; today the stock is valued at 497/8.

Let us find change in stock's value by subtracting present value from the value of stock 3 weeks ago.

`\text{Change in stock's value}=(497)/(8)-(491)/(4)`

Let us have a common denominator.

`\text{Change in stock's value}=(497)/(8)-(491* 2)/(4* 2)`

`\text{Change in stock's value}=(497)/(8)-(982)/(8)`

`\text{Change in stock's value}=(497-982)/(8)`

`\text{Change in stock's value}=(-485)/(8)`

We can see that stock's value has decreased, therefore, the stock is performing below par and option A is the correct choice.