Each month a brokerage house studies various companies and rates each company’s

Question

Each month a brokerage house studies various companies and rates each company’s stock as being either “low risk” or “moderate to high risk.” In a recent report, the brokerage house summarized its findings about 28 aerospace companies and 18 food retailers in the following table: Company Type Low Risk Moderate to High Risk Aerospace company 21 7 Food retailer 3 15

If we randomly select one of the total of 46 companies (a) Find the probability that the company's stock is moderate to high risk given that the firm is an aerospace company. (Round your answer to 4 decimal places.) Probability==?????

(b) Find the probability that the company's stock is moderate to high risk given that the firm is a food retailer. (Round your answer to 4 decimal places.) Probability====???

(c) Determine if the company type is independent of the level of risk of the firm's stock. (Round your answers to 4 decimal places.) Dependent. For two events to be independent, P(Aero | Low) = P(Aero). P(Aero | Low) =???????

but the P(Aero) = ??????. They are not equal.

Explanation / Answer

a)

P(Moderate to High Risk|Aerospace company)=7/28=0.25

b)

P(Moderate to High Risk|Food retailer)=15/18=0.8333

c)

They are not independent because they affect each other's occurence.

Company Type Low Risk Moderate to High Risk Total Aerospace company 21 7 28 Food retailer 3 15 18 Total 24 22 46

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