Five years ago, an investor analyzed six companies with penny stock values and c
ID: 424596 • Letter: F
Question
Five years ago, an investor analyzed six companies with penny stock values and chose to purchase stock in two of the companies. Today, four of the six companies have gone out of business. However, both of the stocks bought by the investor have risen steeply in value. The investor is cautious about attributing his success to a talent for picking stocks, so he wants to know the probability that his picks were successful by chance alone. Assume that five years ago, the names of the six companies were placed in a bag and the investor chose two names at random without replacement, what would have been the probability of the investor choosing the two companies that did not go out of business?
Explanation / Answer
To find out the probability of the investor choosing the two companies that did not go out of business out of the 6 companies, below is the working for the same.
Total No of Companies : 6
Probability of Selecting 2 companies that did not go out of business : 2/6 = 1/3
The probability of the investor choosing the two companies that did not go out of business is 1/3 or 0.33
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