Question

An analyst has a limit order outstanding on a stock. He argues that the probability that the order will execute before the close of trading is 0.20. Thus, the odds for the order executing before the close of trading are _______.a. one in four b. one in fivec. four to one d. five to ond

Answer 1

Answer:

b. One in Five

Step-by-step explanation:

To calculate probability, we need to know the formula: $\frac{Number of Expected outcomes}{Total Number of possible outcomes}$

in this case the probability is given in its decimal form, which is = 0.20

∴ to be able to use our formula easily, we will need to convert the probability to its fraction form.

which is 0.20 = $\frac{20}{100}$ ( to do this, just simply put a 1 under the decimal point and replace the remaining values of 20 with zeroes)

reducing $\frac{20}{100}$ to its simplest form gives $\frac{1}{5}$.

Hence, relating it to our formula, we can see that the number of possible out comes is = 1

and the total number of outcomes = 5.

This means that the probability that the order will execute before the same of closing is the same as  1 in 5