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?

Question

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?

Quizplus · Accepted Answer

The Answer of 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?

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