Given:
Price of one share in 1980 = $
Price of one share in 1989 = $
.
To find:
How much money would you have made if you bought 100 shares of Johnson & Johnson stock in 1980 and sold it in 1989?
Explanation:
Using the given information,
Change in the value of each share = 
= 
= 
= 
= 
Value of one share increased by $.
Value of 100 shares increased by = 
= 
= 
= 
Therefore, you would have made $3887.5 if you bought 100 shares of Johnson & Johnson stock in 1980 and sold it in 1989.
First calculate the effective interest rate because the
problem says that the interest is compounded semi-annually. The formula for
effective interest rate is ieff= [(1+i/n)^n] – 1. The calculated effective
interest rate is 10.25%. The value of the investment in 5 years could be
calculated using the equation, FV= PV (1+i)^n. The value of the investment then would be $244,334.194.
Answer: Economic perspective is when an issue is considered been affected by the economy or the economy affecting the issue when making a decision. This decisions making are described as follows;
Scarcity; Available resources can only be used for only one purpose at a time, that means choice has to be made. Because I choice must be made, decision making has to be considered. Scarcity and choice goes together.
Opportunity cost; The cost of any activity,goods or services is the absolute value of what must be given up to obtain it. That means a decision for the value to be given up as cost, to get a goods, services or activity should be weighed.
Utility; this is the satisfaction derived from the consumption of a goods or services. Before a satisfaction can be achieved, a value must be given up to achieve such satisfaction, a decision of the value to be given up compared to the satisfaction should be weighed
Marginal analysis; any option considered in decision making weigh the marginal benefit against the marginal cost, where marginal means extra, additional, or a change in. Therefore the marginal cost of an action should not exceed it's marginal benefits. Whether the decision is personal or one made by business organization or government, the principle is always the same.
Purposeful behaviour; people always weigh costs and benefits in a way to maximize satisfaction with their decision. They should be a rational self-interest, which will lead to achieving maximum utility in decision making.
