Joe Ferris,a Stock Trader at the Brokerage Firm of Smith,Jones,Johnson,and

question 54

Essay

Joe Ferris,a stock trader at the brokerage firm of Smith,Jones,Johnson,and Thomas,Inc.has noticed that price changes in the shares of Dollar Department Stores at each trade are dependent upon the previous trade's price change.His observations can be summarized by the following transition matrix.
a. What is the long-run average change in the value of a share of Dollar Department Stores' stock per trade?
b. If the shares of Dollar Department Stores are currently traded at $18 and the last trade was at 17 7/8, what is the probability the shares will sell at 18 in two trades?

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Definitions:

Study Session

A period of time set aside for the purpose of focused academic review or learning.

Literature

Written works, especially those considered of superior or lasting artistic merit, including novels, poetry, and plays.

Proactive Interference

The phenomenon where old memories hinder the recall of newly learned information.

Retroactive Interference

The phenomenon where new information interferes with the ability to recall previously learned information.