Answer the following questions. A financial manager made two investments one in

Question

Answer the following questions.

A financial manager made two investments one in oil industry, and one in the municipal bonds. After a one-year period, each of the investments will be classified as either successful (S) or unsuccessful (U). Consider the making of the two investments as an experiment. 1. This experiment involves how many steps? 2. How many experimental outcomes are possible for this experiment? 3. (a). Use a tree diagram to show all the possible outcomes; (b) List the outcomes in the standard format. 4. What is the probability that only one investment will be successful after one year? 5. What is the probability that none of the investments will be successful after one year?

Explanation / Answer

1) It is a two step experiment

2) 4 outcomes- SS,SU,US,UU

3) S u

S U S U

4) P( one investmetn) = P(SU)+P(US)= 1/4+1/4=1/2

5)P( none)=P(UU) =1/4

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