Question

Q3. A commodity's stock price on Day 1 is \( £ 10 \). A financial expert forecasts this stock's trend for the next two days: Day 2 and Day 3. The probability of the stock price going up on Day 2 is 0.1 . If it does go up, the probability of it going up again on Day 3 is 0.3 . If not, the probability of the stock price going up again on Day 3 is 0.8 . a) Construct a tree diagram to show the probabilities of the stock [3] price going up or down in the next two days. b) Find the probability that the stock price: i) goes down on Day 3; [3] ii) goes up on Day 2 given that it goes up on Day 3. [4]

          Q3. A commodity's stock price on Day 1 is \( £ 10 \). A financial expert forecasts this stock's trend for the next two days: Day 2 and Day 3. The probability of the stock price going up on Day 2 is 0.1 . If it does go up, the probability of it going up again on Day 3 is 0.3 . If not, the probability of the stock price going up again on Day 3 is 0.8 .
a) Construct a tree diagram to show the probabilities of the stock
[3] price going up or down in the next two days.
b) Find the probability that the stock price:
i) goes down on Day 3;
[3]
ii) goes up on Day 2 given that it goes up on Day 3.
[4]

Q3. A commodity's stock price on Day 1 is £ 10. A financial expert forecasts this stock's trend for the next two days: Day 2 and Day 3. The probability of the stock price going up on Day 2 is 0.1 . If it does go up, the probability of it going up again on Day 3 is 0.3 . If not, the probability of the stock price going up again on Day 3 is 0.8 .
a) Construct a tree diagram to show the probabilities of the stock
[3] price going up or down in the next two days.
b) Find the probability that the stock price:
i) goes down on Day 3;
[3]
ii) goes up on Day 2 given that it goes up on Day 3.
[4]

Added by John D.

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