Gateway and Micron are computer stocks that frequently move together because the

Question

Gateway and Micron are computer stocks that frequently move together because they represent the same sector of the economy. For example: during a recent 25 day period, of the value of Gateway stock went up 16 days. On 10 of these 16 days, the value Micron stock also went up. However, Micron stock did go up on 2 of the 9 days when Gateway stock did not go up. Turn all these fractions into probabilities and put all the info into a tree diagram. (For example 16/25 is the probability that Gateway stock goes up, so 9/2s is the probability that it doesn't go up. And 10/16 is the conditional probability that Micron goes up if Gateway goes up, etc.) Use your tree diagram to answer the following questions. (a) What is the probability both stocks go up? (b) What is the probability neither stock goes up? (c) If Gateway goes up, what is the conditional probability Micron also goes up? (d) if Micron goes up, what is the conditional probability Gateway also goes up? (e) If Micron does not go up, what is the conditional probability Gateway will go up?

Explanation / Answer

please find table

a) probability both stocks go up =10/25

b)probability neither stock goes up =7/25

c) If Gateway goes up, conditional probability Micron also goes up =10/16
d)Micron goes up, conditional probability Gateway also goes up=10/12

e) Micron does not go up, conditional probability Gateway will go up=6/13

gateway go up go down Total micron go up 10 2 12 go down 6 7 13 Total 16 9 25

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