Supposeyou receive an e-mail from a stock broker who claims to be able toaccurately predict whether any given stock will rise or fall in priceduring the subsequent month. To “prove” her claim, she makes aprediction about performance (higher price or lower price) for tenstocks over the next month. You are skeptical of the broker’s claim, andassume she simply guesses which stocks will improve or worsen in priceover any given month. Put another way, you assume she has a 50% chanceof being correct in her prediction for any given stock. Based on thisassumption, you derive the following probabilities concerning her tenpicks:

1. What is the empirically testable conclusion resulting from your deductive reasoning?
2. How could you test your empirically testable conclusion using a data sample?
3. Outlinethe inductive and deductive reasoning you could use to evaluate whetheror not the broker is simply guessing in her stock picks.