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2) The CEO of a local investment firm has asked you to forecast rates of return (as %'s) for the stock prices of two Seattle-area
2) The CEO of a local investment firm has asked you to forecast rates of return (as %'s) for the stock prices of two Seattle-area bakeries - Tiny French Balken and Raining Donuts. You construct the following joint probability distribution for the rates of return for the stock prices of the two firms: (The values in the body of the table are intersection/ joint probabilities) Rate of Return (6) Raining Donuts Values -10% -5% 5% -15% 0.11 0.07 0.0 Tiny French 0.09 0.05 0126 Bakery 2% 0 13 0.12 a) If the rate of return of Tiny French Bakery is negative, what is the probability the rate of return for Raining Donuts is negativer (Show work; ] point) b) Are the rates of return for the stock prices of the two bakeries statistically independent? (Briefly explain; 0.5 point)
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