a) Your initial belief about stock A is that its future pricecannot be predicted on the basis of existing public information. Aninsider comes forward claiming that the price will fall. You knowthe insider is not totally reliable and tells the truth withprobability p=0.3. Use Bayes’ theorem to calculate theposterior probability that the stock price will fall, based on theinsider’s evidence.A second insider, equally unreliable, comesforward and also claims that the price will fall. Assuming that theinsiders are not colluding, what is your posterior probability of aprice fall?  Based on your above answers, does theprobability of future stock price depend on unreliable insiders?Would you expect this outcome? Explain your argument.
