Question

Suppose that start-up companies in the area of biotechnology have probability 0.2 of becoming profitable, and that those in the area of information technology have probability 0.15 of becoming profitable. A venture capitalist invests in one firm of each type. Assume the companies function independently What is the probability that both companies become profitable?

Answer 1

The probability that both companies become profitable is 0.03 or 3%.

Explanation:

1. Let's review the information given to us to answer the question correctly:

Probability of biotechnology start-up company of becoming profitable = 0.2

Probability of information technology start-up company of becoming profitable = 0.15

2. Assume the companies function independently What is the probability that both companies become profitable?

We will answer this question, assuming these are independent events, this way:

Probability that both companies become profitable = Probability of biotechnology start-up company of becoming profitable * Probability of information technology start-up company of becoming profitable

Replacing with the values given, we have:

Probability that both companies become profitable = 0.2 * 0.15 = 0.03

The probability that both companies become profitable is 0.03 or 3%.