An investor holds two stocks, each of which can rise (r), remain unchanged (u), or decline (d) on any particular day. assume that for the first stock (on a particular day)

p(r) = 0.2 , p(u) = 0.6 , p(d ) = 0.2

and that for the second stock (on a particular day)

p(r) = 0.3 , p(u) = 0.4 , p(d ) = 0.3

assuming that these stocks move independently, find the probability that both stocks decline; the probability that exactly one stock rises; the probability that exactly one stock is unchanged; the probability that both stocks rise. (round your answers to 2 decimal places.)

both decline =

exactly one rises =

exactly one unchanged =

both rise =

1. 0.06

2. 0.38

3. 0.52

4. 0.06

Explanation:

1) Both decline = P1(D) × P2(D)

                         = 0.2 × 0.3

                         = 0.06

(stock 1 declines and stock 2 declines)

2) Exactly one rises:

= P1(R) × [P2(U) + P2(D)] + P2(R) × [P1(U) + P1(D)]

= 0.2 × [0.4+ 0.3] + 0.3 × [0.6 + 0.2]

= 0.14 + 0.24

= 0.38

(stock 1 rises and {stock 2 declines or remains unchanged})

or (stock 2 rises and {stock 1 declines or remains unchanged})

3) Exactly one unchanged:

= P1(U) × [P2(R) + P2(D)] + P2(U) × [P1(R) + P1(D)]

= 0.6 × [0.3 + 0.3] + 0.4 × [0.2 + 0.2]

= 0.36 + 0.16

= 0.52

4) Both rise = P1(R) × P2(R)

                   = 0.2 × 0.3

                   = 0.06

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi

answer; capital structure decision;