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Quantitative Methods Q154

154The probability of an above average economic growth for a country is 0.35. The probability that GE stock will appreciate given the above average economic growth is 0.60.The joint probability of an above average economic growth and appreciation of GE stock is closest to:
  • Option : A
  • Explanation : The joint probability can be computed using the multiplication rule: P (AB) = P(A B) P(B) where P(A B) is the conditional probability of A given that B has occurred. If, A refers to the probability that that GE stock will appreciate and B refers to the probability that the economic growth will be above average, then the joint probability is: 0.60 * 0.35 = 0.21.
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