Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:11. A financial crook plans to deceive investors by
sending text messages to a group of prospects
with prediction of movement of a stock of a
particular company daily, before the stock
market opens. After 10 consecutive days of
correct predictions of the stock, the con artist
would call the victim and successfully ask for
money to purchase stocks in that company &
run off with the money.
This scheme is illegal because the con artist does
not have the ability to reliably predict the price of any
stock. Instead the crook chooses the victim as follows:
1) Text a stock prediction to a group of
prospects before the stock market opens.
2) The text to half of the group predicts that
the stock will go up, while the text to the
other half of the group predicts that the
stock will go down.
3) At the end of the day after the market
closes, the con artist removes half of the
people in the list who received the wrong
prediction for the day.
4) The next morning the con artist sends a
new text to the remaining people in the list
with a new prediction before the market
opens – again half of the group gets one
prediction and the other half gets the
opposite prediction.
5) This process continues for 10 days.
6) On the 11th day, the con artist chooses the
remaining people in group who received
10 consecutive days of the right
predictions to victimize & steal their
money.
Question: How many prospects do the crook need
initially, so that on the 11th day one person remains to
be victimized?
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