1. Assume the financing gurus of a weekend investment television program predict
ID: 3181624 • Letter: 1
Question
1. Assume the financing gurus of a weekend investment television program predicted a 50% chance of XYZ stock gaining in January and a 50% chance of gaining in February. Your financial advisor sees this and tells you there is a 100% chance XYZ stock will gain over the 2-month period. Would you continue to use this financial advisor? Explain.
2. Marie claims she can predict the sex of pregnant women's babies. She sees 1,000 women a year, and she always predicts a female. She charges $1,000 for a prediction, and she always predicts a female (although clients do not know that). When she is wrong, she offers a double-your-money back guarantee. Since the chance of having a female is approximately 50%, how can she earn any money?
Explanation / Answer
A-1)
We shouldnt rely on such financial advisors. So the answer is no. This is a case of subjective probability wherein the people are using their personal judgement like the one given by the financial advisor or financial gurus in this case. Subjective probabilities are like gamble like in stock markets, there is no sort of formal calculation- it is all based on trend or subjective probabilities of the individuals.
A-2)
Again this is kind of gambling that she can predict the sex of the child- she gains if the lady gives birth to a girl or loses if vice versa. In cases of losing, she would expect that the client may not claim for 2000 dollars which she needs to give back to client.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.