Meagan Dubean manages a portfolio of 200 common stocks. Her staff classified the portfolio stocks by 'industry sector' and 'investment objective.' If a stock is selected randomly from Meagan's portfolio, P(Airlines|Income) = ___.

Question

Meagan Dubean manages a portfolio of 200 common stocks. Her staff classified the portfolio stocks by 'industry sector' and 'investment objective.'  If a stock is selected randomly from Meagan's portfolio, P(Airlines|Income) = ___.

Quizplus · Accepted Answer

We are given that the portfolio stocks are classified by industry sector and investment objective. We are not given the exact numbers, but we know that there are at least some stocks in the Airlines industry sector and some stocks with an Income investment objective. 
Now, we need to find the probability of selecting a stock that is in the Airlines sector given that it has an Income investment objective. 
P(Airlines|Income) = P(Airlines and Income)/P(Income)
We are not given the exact numbers, so let's assume that there are 10 stocks in the Airlines sector and 50 stocks with an Income investment objective. We need to find out how many of those stocks fall into both categories. Let's say there are 4 stocks that are in both the Airlines sector and have an Income investment objective. 
P(Airlines and Income) = 4/200 = 0.02
P(Income) = 50/200 = 0.25
Now we can plug these values into the conditional probability equation: 
P(Airlines|Income) = 0.02/0.25 = 0.40
Therefore, the answer is B) 0.40.

Meagan Dubean Manages a Portfolio of 200 Common Stocks