As peculator purchases three stocks on the London Stock Exchange.
He estimates that the probabilities that each of these stocks will have risen in value by the end of the week are, respectively, 0.6, 0.8 and 0.4.
(a) Assuming that the price changes in the three stocks are independent, determine the probability that all three stocks will have risen in value by the end of the week.
(b) Do you think that it is reasonable to assume that movements in the prices of individual stocks are independent?