Page 631 - Microeconomics, Fourth Edition

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$1,900
$1,800
$1,700
$1,600
$1,500
$1,400
Value of $1,000 investment $1,100
$1,300
$1,200
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$50
9/1/1999 3/1/2000 9/1/2000 3/1/2001 9/1/2001 3/1/2002 9/1/2002 3/1/2003 9/1/2003 3/1/2004 9/1/2004 3/1/2005 9/1/2005 3/1/2006 9/1/2006 3/1/2007 9/1/2007 3/1/2008 9/1/2008 3/1/2009 9/1/2009 3/1/2010

FIGURE 15.1 `Value of $1,000 Invested in Amazon.com, September 1, 1999–April 1, 2010
The value of a $1,000 investment in Amazon.com stock in September 1999 has fluctuated con-
siderably over the last eleven years. By April 2010, it was worth over $1,750.
Source: Yahoo Finance, http://finance.yahoo.com/q/hp?s=AMZN (accessed April 10, 2010).

of the technology bubble, your investment would have been worth just $87, a loss of value of nearly
93 percent. Five years after your initial investment, in September 2004, your investment would have been
worth about $500. Three years later, in September
2007, your investment would have rebounded in value
to $1,165, only to fall 14 months later in November
2008, in the midst of the financial crisis and the Great
Recession, to $534. But nearly a year and half after
that, your investment would have grown again,
cresting to over $1,700 as of April 2010.
The fate of Amazon.com’s stock provides an excel-
lent example of risk. Investing in Amazon’s stock is like
riding a roller coaster in a fog bank. You know it will go
up and down, but you can’t predict when the ups and
downs will occur, nor how severe they will be. Economic
life is full of risk situations: entrepreneurs face a risk of
failure when they launch new businesses; sports teams

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