Question

Javier will be a senior next year in high school. To celebrate his graduation, his grandmother gave him a sizeable about of money. Since he has scholarships for college, Javier decided to investigate investing the money in stocks. He talked to a consultant, who explained some of her investment types and their returns as compared to the market average. Javier’s choices were to invest in high- or low-capital stock, below average or at or above average and domestic or international. Find the probability of the following situation: P(the stock performs below average|domestic)

Answer 1

Probabilities are used to determine the chances of events.

The probability P(the stock performs below average|domestic) is 0.109

How to calculate the probability

Let A represent the number of stocks that performs below average

B represents the number of domestic stock

From the table, we have:

n(A n B) = 55 i.e. domestic stocks that performs below average

n(B) = 505 i.e. all domestic stocks

The probability is then calculated as:

$P(A\ |\ B) = \frac{n(A\ n\ B)}{n(B)}$

This gives

$P(A\ |\ B) = \frac{55}{505}$

$P(A\ |\ B) = 0.109$

Hence, the probability P(the stock performs below average|domestic) is 0.109

Read more about probabilities at:

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