From past experience a stockbroker believes that under present economic conditio

Question

From past experience a stockbroker believes that under present economic conditions a customer will invest in tax-free bonds with a probability of 0.6, will invest in mutual funds with a probability of 0.3, and will invest in both tax-free bonds and mutual funds with a probability of 0.07. Complete parts (a) and (b) below (a) At this time, find the probability that a customer will invest in either tax-free bonds or mutual funds. The probability that a customer will invest in either tax-free bonds or mutual funds is (Type an integer or a decimal. Do not round.)

Explanation / Answer

Given that,

P(Invest in tax-free bonds) = 0.6

P(Mutual funds) = 0.3

P(tax-free bonds and mutual funds) = 0.07

To find,

P(tax-free bonds or mutual funds)

= P(tax-free bonds) + P(mutual funds) - P(tax-free bonds and mutual funds)

= 0.6 + 0.3 - 0.07

P(tax-free bonds or mutual funds) = 0.83

Therefore, the probability that a customer will invest in either tax-free bonds or mutual funds is 0.83

Note: P(A or B) = P(A) + P(B) - P(A and B)

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