. A mutual fund company offers its customers several different funds (see table
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Question
. A mutual fund company offers its customers several different funds (see table below) Among customers who own shares in just one fund, the percentages of customers in the different funds are as follows Money-market Short bond Intermediate bond Long bond 20% 15% 10% 5% High-risk stock Moderate-risk stock Balanced 18% 25% 7% A customer who owns shares in just one fund is selected at random (a) What is the probability that the selected individual owns shares in the balanced fund? (b) What is the probability that the individual owns shares in a bond fund? (c) What is the probability that the selected individual does not own shares in a stock fund?Explanation / Answer
a) The probability that the selected individual owns shared in balanced fund here is computed as:
= P( balanced fund ) = 0.07
Therefore 0.07 is the required probability here.
b) The probability that the selected individual owns shares in bond fund here is computed as:
= P( bond fund ) = P( short bond ) + P( intermediate bond ) + P( long bond ) = 0.15 + 0.1 + 0.05 = 0.30
Therefore 0.30 is the required probability here.
c) The probability that the selected individual does not own shares in stock fund is computed as:
= 1 - P( High-risk stock ) - P( Moderate-risk stock ) = 1 - 0.18 + 0.25 = 0.57
Therefore 0.57 is the required probability here.
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