Solutions Probability

Solution) The recent weekly trends of two particular stock prices, P1 and P2, can best be described by the joi

Question: The recent weekly trends of two particular stock prices, P1 and P2, can best be described by the joint probability distribution shown in the graph below.

Weekly trends in two stock prices

		Stock 2 (P₂)
		Increases	Remains constant	Decreases
Stock 1 (P₁)	Increases	0.05	0.05	0.10
	Remains constant	0.05	0.20	0.25
	Decreases	0.10	0.05	0.15

a) What is the probability that the price of stock 1 will not increase in the upcoming week?

b) What is the probability that the price of stock 2 will change in the upcoming week?

c) What is the probability that the price of stock 1 will not decrease, given that the price of stock 2 will remain constant in the upcoming week?

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