From past experience, a stockbroker believes that under present economic conditions a customer will invest in tax-free bonds with a probability of 0.6, will invest in mutual funds with a probability of 0.3, and will invest in both tax-free bonds and mutual funds with a probability of 0.15. At this time, find the probability that a customer will invest:

(a) in either tax-free bonds or mutual funds;

(b) in neither tax-free bonds nor mutual funds.

Question

Business

Cannoli

21 October, 20:33

From past experience, a stockbroker believes that under present economic conditions a customer will invest in tax-free bonds with a probability of 0.6, will invest in mutual funds with a probability of 0.3, and will invest in both tax-free bonds and mutual funds with a probability of 0.15. At this time, find the probability that a customer will invest:

(a) in either tax-free bonds or mutual funds;

(b) in neither tax-free bonds nor mutual funds.

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Answers (1)

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Lance · Answer 1

A. 0.75

B. 0.25

Explanation:

Let : P (B) be probability of investing in tax free bonds, P (M) be probability of investing in mutual funds.

P (B or M) i. e P (B U M) = P (B) + P (M) + P (M ∩ B) i. e P (M & B)

P (B U M) = 0.6 + 0.3 - 0.15

P (B U M) = 0.75

P (Neither B or M) = 1 - [ P (B or M) ] = 1 - [ P (B U M) ]

1 - 0.75 = 0.25