A graph of AOL-time warner stock pricesover the last 13 months is given below. D

Question

A graph of AOL-time warner stock pricesover the last 13 months is given below. Draw a"BEST FREEHAND" fitted strightline through the data. Obtain the linear equation of the BFBE line drawn. Assuming that things continue as indicated in the graph. What will be the price of AOL stock: 3-months from now? 6-months from now? Obtain the linear equation of the LEAST SQUARES line. NOTE: Month one is JUNE, as is month 13. (Don't be 'fooled' by the fact that STOCK PRICE is written on the RIGHT of the graph, and time in months is listed ABOVE..)

Explanation / Answer

Answer: The line that can drawan in this cae contains two points:

one is (58,1.8) and the other is (20,13)

thereofre the slope of the line will be: -(58-20)/(13-1.8) = -38/11.2 = -3.39

so the equation of the line is:

(y - 13) = -3.39(x - 20)

b. 3 months from now

y = 16

then at this value of y we have the value of x (stock price as)

16-13 = -3.39x + 67.85

x = $19.11

Now after 6 months

y = 19

then at this value of y we have the value of x (stock price as)

19-13 = -3.39x + 67.85

x = $18.23

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---