Question

Holland America Cruise Lines has three luxury cruise ships that sail to Alaska during the summer months. Since the business is very competitive, the ships must run full during the summer if the company is to turn a profit on this line. A tourism expert hired by Holland America believes there is a 0.92 chance the ships will sail full during the coming summer if the dollar does not appreciate against European currencies, and a 0.75 chance they will sail full if the dollar does appreciate in Europe (appreciation of the dollar in Europe draws U.S. tourists there, away from U.S. destinations). Economists believe the dollar has a 0.23 chance of appreciating against European currencies soon. What is the probability the ships will sail full?

Answer 1

0.8809 = 88.09% probability the ships will sail full.

Explanation:

What is the probability the ships will sail full?

0.75 of 0.23(dollar appreciating)

0.92 of 1 - 0.23 = 0.77(dollar not appreciating). So

`p = 0.75*0.23 + 0.92*0.77 = 0.8809`

0.8809 = 88.09% probability the ships will sail full.