An investor holds two stocks, each of which can rise (R), remain unchanged (U), or decline (D)

Question:

An investor holds two stocks, each of which can rise (R), remain unchanged (U), or decline (D) on any particular day. Let x equal the number of stocks that rise on a particular day.

a. Write the probability distribution of x assuming that all outcomes are equally likely.

b. Write the probability distribution of .v assuming that for each stock P(R) = .6, P(U) = .1, and P(D) = .3 and assuming that movements of the two stocks are independent.

c. Write the probability distribution of x assuming that for the first stock P(R) = .4, P(U) = .2, P(D) = .4, and that for the second stock P(R) = .8, P(U) = .1, P(D) = .1, and assuming that movements of the two stocks are independent.

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