Statistics: Informed Decisions Using Data (4th Edition)

Published by Pearson
ISBN 10: 0321757270
ISBN 13: 978-0-32175-727-2

Chapter 5 - Section 5.3 - Assess Your Understanding - Applying the Concepts - Page 286: 31

Answer

No, the event all 3 stocks will increase at least 10% is not unusual.

Work Step by Step

$P(first~stock~will~increase~at~least~10$%$)$ $=0.7$ $P(second~stock~will~increase~at~least~10$%$)$ $=0.55$ $P(third~stock~will~increase~at~least~10$%$)$ $=0.20$ Using the Multiplication Rule for Independent Events (page 282): $P(all~3~stocks~will~increase~at~least~10$%$)=$ $P(first~stock~will~increase~at~least~10$%$)\times$ $P(second~stock~will~increase~at~least~10$%$)\times$ $P(third~stock~will~increase~at~least~10$%$)=$ $=0.7\times0.55\times0.20=0.077$ $0.077\gt0.05$. The event all 3 stocks will increase at least 10% is not unusual.
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