PLEASE SOLVE PART C ii. THE ANSWER should be 0.05 and provide detailed explanati

Question

PLEASE SOLVE PART C ii. THE ANSWER should be 0.05 and provide detailed explanation as I have a test tomorrow.

c. Suppose a stockbroker has recommended eight stocks to a client and that five of the recommended stocks will increase in value over the next year.

(i) (1 point) Assume that the client chooses to invest in four of the eight rec- ommended stocks at random. Determine the probability that at least half of the stocks selected by the client will increase in value over the next year. Explain.

(ii) (1 point) Assume that the client will allocate $10,000 to the eight recom- mended stocks in increments of $1,000, with all allocations (of the $10,000) being equally likely. Determine the probability that the client will only pur- chase stocks that will increase in value over the next year. Explain.

Explanation / Answer

there are total 8 stocks , out of which 5 will increase in value

4 are selected

X = number of stocks out of 4 that will increase in value

P(X = 4) = 5C4 / 8C4

= 5/70

= 0.07142857

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