Suppose that each day the price of a stock moves up 1/8 th of a point with probability
1/3 and down 1/8 th of a point with probability 2/3. The price fluctuations are
independent each day.
(a) What is the probability that the stock has a price gain in 6 days?
probability that the stock has a price gain in 6 days =P(at most 2 down in 6 days)=P(X<=2)=P(X=0)+P(X=1)+P(X=2)
=6C0(2/3)0(1/3)6+6C1(2/3)1(1/3)5+6C2(2/3)2(1/3)4=0.100137
Suppose that each day the price of a stock moves up 1/8 th of a point...
Each day the price of a stock goes up a dollar with probability .75, or down a dollar with probability .25. Assuming these fluctuations to be independent, what is the probability that after 6 days the stock will be trading at the same price? What is the probability that it will have gone down? How can I do it in Microsoft Excel?
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Please explain your answers. I need to learn this
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