Consider two stocks. Stock 1 always sells for $10 or$20. If stock 1 is selling for $10 today, there is a .80 chance that it will sell for$

Question

Consider two stocks. Stock 1 always sells for $10 or$20. If stock 1 is selling for $10 today, there is a .80 chance that it will sell for$10 tomorrow. If it is selling for $20 today, there is a .90 chance that it will sell for$20 tomorrow. Stock 2 always sells for $10 or$25. If stock 2 sells today for $10, there is a .90 chance that it will sell tomorrow for$10. If it sells today for $25, there is a .85 chance that it will sell tomorrow for$25. On the average, which stock will sell for a higher price? Find and interpret all mean first passage times.

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3 months 2021-07-19T21:56:58+00:00 1 Answers 0 views 0

On stock 2 will be has an average sell of $50 for higher price. Step-by-step explanation: stock 1 of$10 (today)+ $10 (80% chance tommorow)=$20 stock sell price and for $20(today)+$20(90% chance tommorow)= $40 this two final of price for stock 1. Stock 2 of$10 (today)+$10(90% chance tommorow)=$20 and of $25(today)+$25(85% chance tomorrow)= \$50 this two for final of it’s price for stock 2.So as for Stock 2 has the average sell higher price.