An analyst has a limit order outstanding on a stock. He argues that the probability that the order will execute before the close of trading is 0.20. Thus, the odds for the order executing before the close of trading are
A) one in four.
B) one in five.
C) four to one.
D) five to one.

Question

Quizplus · Accepted Answer

The odds are the ratio of the probability of an event occurring to the probability of it not occurring. In this case, the probability of the order executing before the close of trading is 0.20, and the probability of it not executing is 1 - 0.20 = 0.80. Therefore, the odds are 0.20 / 0.80 = 1 / 4, which is one in four.

An Analyst Has a Limit Order Outstanding on a Stock