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An analyst develops the following probability distribution about the state of the economy and the market.

Which of the following statements about this probability distribution is least likely accurate?

A.The probability of a normal market is 0.30.

B.The probability of having a good economy and a bear market is 0.12.

C.Given that the economy is good, the chance of a poor economy and a bull market is 0.15.

D.Given that the economy is poor, the combined probability of a normal or a bull market is 0.50.


Solution: C

Given that the economy is good, the probability of a poor economy and a bull market is zero. The other statements are true. The P(normal market) = (0.60 × 0.30) + (0.40 × 0.30) = 0.30. P(good economy and bear market) = 0.60 × 0.20 = 0.12. Given that the economy is poor, the probability of a normal or bull market = 0.30 + 0.20 = 0.50.

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