Quantitative Methods Q163
163An analyst is analyzing the prospects of survival of ShopKart, an ecommerce retailer over the next six months. The retailer’s survival depends on the growth in customer base. The analyst assigns probabilities to three possible scenarios and estimates the probability of closing down for each of them.
| Scenario | Probability of scenario | Probability of closing down |
| Decrease in customer base | 30% | 60% |
| Maintaining the customer base 30% | 50% | 30% |
| Increase in customer base | 20% | 10% |
Based on the analyst’s estimates, the probability that ShopKart will not close down in the next six months is closest to:
- Option : B
- Explanation : Using the total probability rule, the unconditional probability of closing down is given by: (0.3) (0.6) + (0.5) (0.3) + (0.2) (0.1) = 0.35 The probability that ShopKart will not close down is, 1 – 0.35 = 0.65 = 65%
