Question

The likelihood of Company A's stock price rising is 20%, and the likelihood of Company B's stock price rising is 30%. Assume that the returns of Company A and Company B stock are independent of each other. The probability that the stock price of at least one of the companies will rise is ________.

Answer 1

Answer: 44%

Explanation:

In probability, Independent event is simply an event that doesn't have anything to do with the occurrence or non-occurrence of another event.

From the question, we are informed that likelihood of Company A's stock price rising is 20%, and the likelihood of Company B's stock price rising is 30% and they are both independent.

Therefore, the probability that the stock price of at least one of the companies will rise goes thus:

P(at least one will rise) will be:

= 1 - P(both fall)

= 1 - [(1-0.20) × (1-0.30)]

= 1- (0.8 × 0.7)

= 1 - 0.56

= 0.44

= 44%