Suppose the price of one typical stock could only increase by 2 or decrease by 1...

Suppose the price of one typical stock could only increase by 2 or decrease by 1 in one day. From the historical data, we somehow know that this stock goes up with probability 0.7, goes down with probability 0.3. Suppose the initial price is 100. Suppose we want to study the price behavior for that stock for one week(5-weekdays). (Round your answer in 3 decimal Places) This question is just for setting up the model.

what is the probability of the stock price close up at 102 at the end of Monday?

what is the probability of the stock price close up at 99 at the end of Monday?

Which of the following distribution bear the most resemblance to the distribution of stock price on Monday?

what is the probability of the stock price close up at 107 at the end of Friday?

Which of the following distribution bear the most resemblance to the distribution of stock price at the end of Friday?

what is the probability of the stock price close up at 108 at the end of Friday?

what is the probability of the stock price close up at most as 107 (include 107 itself) at the end of Friday?

what is the probability of the stock price close up at least as 108 (include 108 itself) at the end of Friday?

what is the probability of the stock price close up at least as 107 (include 107 itself) at the end of Friday?

what is the probability of the stock price close up at most as 100 (include 100 itself) at the end of Friday?

Solutions

Expert Solution

• Probability of stock (P)

At Stock Price $102 at the end of monday, P = 0.70
At Stock Price $99 at the end of monday, P = 0.30
Stock price of monday resembles with Thursday ie. 102 & 99
At Price $ 107 at the end of friday, P = 0.36015
Stock Price of Friday resembles with stock price of tuesday ie. 104, 101 & 98
Probability of Stock price $ 108 at the end of friday is zero.
Probability of atmost stock proce 107 at the end of friday is 1-0.16807 = 0.83193
Probability of atleast stock price 108 at the end of friday is 0.16807
Probability of atleast stock price 107 is 0.52822 which is sum of 0.16807 & 0.36015
Probability of atmost stock price 100 is 0.03078 which is sum of 0.02835 & 0.00243

jeff jeffy answered 1 year ago

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