#4 Please help solve asap. Due in an hour. Thanks in advance A mutual fund compa

Question

#4

Please help solve asap. Due in an hour. Thanks in advance

A mutual fund company offers its customers a variety of funds: a money-market fund, three different bond funds (short, intermediate, and long-term), two stock funds (moderate and high-risk), and a balanced fund. Among customers who own shares in just one fund, the percentages of customers in the different funds are as follows. Money-market 25% Short bond Intermediate bond 5% Long bond High-risk stock 1996 nck 25% Moderate-risk stock 25% 12% Balanced 9% 5% g bond ond 596 A customer who owns shares in just one fund is randomly selected. (a) What is the probability that the selected individual owns shares in the balanced fund? (b) What is the probability that the individual owns shares in a bond fund? (c) What is the probability that the selected individual does not own shares in a stock fund?

Explanation / Answer

Part a) Selected individual owns shares in the balanced fund

Solution :- From the above table, we can see that individual invest 9% in the balanced fund

so the probability of balanced fund is 9/100 = 0.09

Part b) Probability that individual owns shares in a bond fund

Solutions :- There are 3 types of bond ( short bond, intermediate bond, long bond) hence adding the probabilities of each will the the probability of invesment in bond funds.

short bond 12% = 12/100 = 0.12

Intermediate bond 5% = 5/100 = 0.05

Long bond 5% = 5/100 = 0.05

Probability of individual owns shares in bond fund = 0.12 + 0.05 + 0.05 = 0.22

Part c) Probability that selected individual does not own shares in the stock fund

Solution:- There the 2 type of stock fund available High risk stock and Moderate risk stock

High risk stock 19% = 19/100 = 0.19

Moderate risk stock 25% = 25/10 = 0.25

Probability of stock fund = 0.19 + 0.25 = 0.44

Probability of selected individual does not own share in the stock fund = 1 - Probability of selected individual own shares in stock fund

Probability of selected individual does not own share in the stock fund = 1 - 0.44

Probability of selected individual does not own share in the stock fund = 0.56

Type of fund Percentages probability Money Market 25% 0.25    Short bond 12% 0.12 Intermediate bond 5% 0.05 Long bond 5% 0.05 High - risk stock 19% 0.19 Moderate - risk stock 25% 0.25 Balanced 9% 0.09 Total 100% 1

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