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Sarah Jones is a security analyst for a firm called FinPlan Co. Although she is optimistic about the firm’s future, she is concerned that its stock price will be hugely affected by the condition of

Sarah Jones is a security analyst for a firm called FinPlan Co. Although she is optimistic about the firm’s future, she is concerned that its stock price will be hugely affected by the condition of the economy. She believes that the probability is 0.20 that credit flow will improve significantly, 0.55 that it will improve only marginally, and 0.25 that the credit flow will not improve at all. She also estimates that the probability that the stock price of FinPlan Co will go up is 0.58 with significant improvement in credit flow in the economy, 0.31 with marginal improvement in credit flow in the economy, and 0.12 with no improvement in credit flow in the economy.

1)What is the probability that the stock price of FinPlan Co goes up?

2)What is the probability that the credit flow in the economy has improved significantly, given that the stock price of FinPlan Co has gone up?

Apr 15 2021 View more View Less

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