We want to model the daily movement of a particular stock (say Amazon, ticker = AMZN) using a homogeneous markov-chain. Suppose at the close of the market each day, the stock can end up higher or lower than the previous day’s close. Assume that if the stock closes higher on a day, the probability that it closes higher the next day is .65. If the stock closes lower on a day, the probability that it closes higher the next day is .45. (a) What is the 1-step transition matrix? (Let 1 = higher, 2 = lower)

(b) On Monday, the stock closed higher. What is the probability that it will close higher on Thursday (three days later)

See the explanation and attached images for the answers.

Step-by-step explanation:

a) 1-step transition matrix:

See the attached image for transition matrix.

Let the matrix be M

if the stock closes higher on a day, the probability that it closes higher the next day is 0.65.

If the stock closes lower on a day, the probability that it closes higher the next day is 0.45

if the stock closes higher on a day, the probability that it closes lower the next day is 1 - 0.65 = 0.35

if the stock closes lower on a day, the probability that it closes lower the next day is 1 - 0.45 =0.55

b)

To compute probability for 3 days later multiply matrix M (from part a) thrice i.e. M*M *M

The probability that it will close higher on Thursday is 0.566. See the transmission matrix of M³ for higher-higher. This can be interpreted as:

if the stock closed higher on Monday, the probability that it closes higher the on Thursday (three days later) is 0.566

to find the perimeter of the rectangle this is the expression:

x-9+x-9+3x-4+3x-4=138

if we simplify it:

8x-26=138

remember, 138 is what it all adds up to

the length is 11.5cm

the width is 57.5cm

the area is 661.25cm^2

the answers might not be correct use at own risk