The following contingency table shows average yield (rows) and average duration

Question

The following contingency table shows average yield (rows) and average duration (columns) for 38 bond funds.

   

Average Portfolio Duration

For a randomly chosen bond fund, find the probability of the following: (Round your answers to 4 decimal places.)

   

Average Portfolio Duration

  Yield Short
(D1) Intermediate
(D2) Long
(D3) Row Total   Small (Y1) 5           2            2           9             Medium (Y2) 3           2            2           7             High (Y3) 1           4            17           22                 Column Total 9           8            21           38         

Explanation / Answer

a) P(bond fund is long duration ) = 21/38 =0.5526

b) P(Bond fund has high yield) = 22/38 = 0.5789

c) P(high yield| short duration) = P( high yield and short duration)/ P(short duration) = 1/9 = 0.1111

d) P( short duration | high yield) = P(short duration andhigh yield) / P( high yield) = 1/22 = 0.0455

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