Got Homework?

Connect with other students for help. It's a free community.

  • across
    MIT Grad Student
    Online now
  • laura*
    Helped 1,000 students
    Online now
  • Hero
    College Math Guru
    Online now

Here's the question you clicked on:

55 members online
  • 0 replying
  • 0 viewing

yeungandy Group Title

The price of a particular highly volatile stock either increases 20% or decreases 25% in any given week. The probability of an increase in any week is 45%, independent of the stock’s performance on other weeks. The current price of the stock is $10. (a) Determine the probability that the stock’s price exceeds $12 five weeks from now. (b) What is the stock’s expected value two weeks hence? Four weeks hence?

  • 2 years ago
  • 2 years ago

  • This Question is Open
  1. kropot72 Group Title
    Best Response
    You've already chosen the best response.
    Medals 1

    |dw:1353173024489:dw| (a) The probability tree above shows all the possible outcomes after two weeks. The probability of each outcome is found by multiplying the values of probability leading to it. For example the probability of the stock reaching $14.40 after two weeks is found to be 0.45 * 0.45 = 0.2025. The tree can be extended to show all possible outcomes at the end of five weeks. The probabilities of all outcomes exceeding $12 are then added to find the total probability of exceeding $12 at the end of five weeks. (b) The expected value two weeks hence is found by multiplying each possible outcome by its probability and adding the results as follows: \[($14.40\times 0.2025)+($9.00\times 0.2475)+($9.00\times 0.2475)+($5.625\times 0.3025)=?\]

    • 2 years ago
    • Attachments:

See more questions >>>

Your question is ready. Sign up for free to start getting answers.

spraguer (Moderator)
5 → View Detailed Profile

is replying to Can someone tell me what button the professor is hitting...


  • Teamwork 19 Teammate
  • Problem Solving 19 Hero
  • You have blocked this person.
  • ✔ You're a fan Checking fan status...

Thanks for being so helpful in mathematics. If you are getting quality help, make sure you spread the word about OpenStudy.

This is the testimonial you wrote.
You haven't written a testimonial for Owlfred.