Question

Alison has all her money invested in two mutual funds, A and B. She knows that there is a 40% chance that fund A will rise in price, and a 60% chance that fund B will rise in price given that fund A rises in price. What is the probability that both fund A and fund B will rise in price

Answer 1

Answer:

24% probability that both fund A and fund B will rise in price

Step-by-step explanation:

We have these following probabilities:

40% probability that fund A will rise in price.

If fund B rises in price, 60% probability that fund B does.

What is the probability that both fund A and fund B will rise in price

40% of A, and if A rises, 60% is B. Since the only outcome that interests us is both rising in price, we multiply these probabilities

$P = 0.4*0.6 = 0.24$

24% probability that both fund A and fund B will rise in price