Question
Jim MacFarlane owns shares of stock in both Evergreen Company and Daylight Company. Jim has recorded the performance of these shares on each day for
Jim MacFarlane owns shares of stock in both Evergreen Company and Daylight Company. Jim has
recorded the performance of these shares on each day for a 300 day period, observing whether the
price of these shares has risen, fallen or remain unchanged. Assume the 300 day period is a good
indication of the future, so we can use this data to determine probabilities of these events occurring
again. Jim's data is as follows:
Event
Evergreen
Company
Daylight
Company # of days
E1 Rise Rise 70
E2 Rise Unchanged 40
E3 Rise Fall 28
E4 Unchanged Rise 30
E5 Unchanged Unchanged 18
E6 Unchanged Fall 20
E7 Fall Rise 28
E8 Fall Unchanged 16
E9 Fall Fall 50
Define the following additional events:
Let event A = rise in Evergreen Company
event B = fall in Daylight Company
event C = unchanged price in Evergreen Company
event D = unchanged price in Daylight Company
In all questions below, you must determine the probabilities using the numbers in the table above to
show the calculations that support your answers. Probability formulas are required in all questions
except part (g) below.
(a) A rise in the price of Evergreen
Page 2
(b) A fall in the price of Daylight stock
(c) A rise in Evergreen and a fall in Daylight stock
(d) A rise in Evergreen or a fall in Daylight stock
(e) Which stock has a higher probability of having its stock price rise? What is that probability?
(f) That Evergreen stock will rise or remain unchanged
(g) That Evergreen stock price will rise and Daylight stock will remain unchanged
(h) That Evergreen stock will rise or Daylight Company stock will remain unchanged
(i) Are the two events "a rise in Evergreen stock" and "a fall in Daylight stock" independent?
Provide evidence.
Can you please solve this for me ?
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