Question 4.12

4.12 Proportions of McDonald's price changes.

Continue the study of daily price changes of McDonald's stock from the Exercise 4.9. Consider three possible outcomes: (1) positive price change, (2) no price change, and (3) negative price change.

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  1. Find the proportions of each of these outcomes. This is most easily done by sorting the price change data into another column of the software and then counting the number of negative, zero, and positive values.
  2. Explain why the proportions found in part (a) are reasonable estimates for the true probabilities.