Probability-after two days stock will at its original place

Reference no: EM13132000

A simplified model for the movement of the price of stock supposes that on each day the stock's prices either moves up 1 unit with probability p or moves down 1 unit with probability 1-p. The changes on different days are assumed to be independent.

a. What is the probability that after 2 days the stock will be at its original price?
b. What is the probability that after 3 days the stock's price will have increased by 1 unit?
c. Given that after 3 days the stock's price has increased by 1 unit, what is the probability that it went up on the first day?

Reference no: EM13132000

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