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On Monday, a certain stock closed at S10 per share. On Tuesday, you expect the stock to close at S9, $10, or $11 per share,
On Monday, a certain stock closed at S10 per share. On Tuesday, you expect the stock to close at S9, $10, or $11 per share, with respective probabilities 0.3, 0.3, and 0.4. On Wednesday, you expect the stock to close S1 lower, unchanged, or S1 higher than Tuesday's close, with the following probabilities. $1 Tuesday':s Close $9 $10 $11 $1 Lower Unchanged Higher 0.4 0.3 0.3 0.5 0.2 0.3 0.2 0.7 You are directed to buy 100 shares of the stock before the market starts on Thursday. All purchases are made at the end of the day, at the known closing price for that day, so your only options are to buy now (end of Monday), at the end of Tuesday, or at the end of Wednesday. The objective is to minimize the expected purchase price. Draw a decision tree to decide when it is optimal to buy the stock
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