Consider two stocks. Stock 1 always sells for $10 or $20. If stock 1 is selling for$10 today, there is a 0.8 chance that it will sell for $10 tomorrow. If it is selling for $20 today, there is a 0.9chance 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 0.9 chance that it will sell tomorrow for $10. If it sells today for $25, there is a 0.85 chance thatit will sell tomorrow for $25. Required:
a. Assume that stock 1 is currently selling for $10. What is the probability that it also sells for $10 three days from now?
b. What fraction of the time stock 2 will sell for $25?
c. What are the limiting probabilities of selling prices for each stock?