Question 1: Consider a stock market with two stocks A and B. Stock A always sells for $5 or $10; stock B always sells for $6 or $12. If stock A is selling for $5 today, there is an 80% chance it will sell for $5 tomorrow. If stock A is selling for $10 today, there is a 75% chance it will sell for $10 tomorrow. If stock B is selling for $6 today, there is a 75% chance it will sell for $6 tomorrow. If stock B is selling for $12 today, there is 90% chance it will sell for $12 tomorrow. Required: Compute the average costs of stock A and stock B. Note: Ignore any time value of money. The hypothesis that stock market prices follow a Markov process is one form of the efficient market hypothesis. Question 1: Consider a stock market with two stocks A and B. Stock A always sells for $5 or $10; stock B always sells for $6 or $12. If stock A is selling for $5 today, there is an 80% chance it will sell for $5 tomorrow. If stock A is selling for $10 today, there is a 75% chance it will sell for $10 tomorrow. If stock B is selling for $6 today, there is a 75% chance it will sell for $6 tomorrow. If stock B is selling for $12 today, there is 90% chance it will sell for $12 tomorrow. Required: Compute the average costs of stock A and stock B. Note: Ignore any time value of money. The hypothesis that stock market prices follow a Markov process is one form of the efficient market hypothesis