Economics and Finance
Detailed analysis of two technology stocks indicates over the next six months the probability that the price of stock 1 will rise is 0.42 and for stock 2 the probability is 0.63. Suppose the stock prices react independently.
a. What is the probability that both stock prices will rise over the next six months?
b. What is the probability that stock 1 will rise and stock 2 will sink?
c. Suppose both stocks are in the technology sector, and stock 2 tends to follow stock 1. If stock 1 rises over the next six months, the chance of stock 2 rising is 81%. Now what is the probability of both stock prices rising over the next six months?