Question

A mutual fund company offers its customers several different funds: a money market fund, three different bond funds, two stock funds, and a balanced fund. Among customers who own shares in just one fund, the percentages of customers in the different funds are as follows:

Money market 20%
Short-term bond 15%
Intermediate-term bond 11%
Long-term bond 5%
High-risk stock 18%
Moderate-risk stock 24%
Balanced fund 7%
A customer who owns shares in just one fund is to be selected at random.

(a) What is the probability that the selected individual owns shares in the balanced fund?


(b) What is the probability that the individual owns shares in a bond fund?


(c) What is the probability that the selected individual does not own shares in a stock fund?

Answer 1

a) 7/100

b) 31/100

c) 58/100

Explanation:

The probability of each case is just the percentage/100.

a) The balanced fund percent is 7%. Since that's out of 100%, the probability is 7/100.

b) The bond funds are short term bond (15%), Intermediate-term (11%) and long term (5%). Adding these up we get 31%. Similarly to (a) we get a probability of 31/100.

c) There are two stock funds, high risk (18%) and moderate-risk(24%). The probability of the customer being in the stock fund is (18+24)/100. This equals 42/100. Conversely, the probability of NOT being in the stock fund should be 1 - probability of being in stock fund. This means 1 - (42/100). This equals 58/100.