SOLUTION: P(A)=0.25; P(B) = 0.40; P(A and B)=0.10. Find P(A or B) AND Suppose you are considering the purchase of IJK Corporation. You feel that if the Dow Jones average rises next y

Question 1045627: P(A)=0.25; P(B) = 0.40; P(A and B)=0.10. Find P(A or B)

AND
Suppose you are considering the purchase of IJK Corporation. You feel that if the Dow Jones average rises next year, there is an 85 percent probability that IJK stock will go up. You feel also that there is a 70 percent chance that the Dow Jones average will increase next year. What is the probability that both the Dow Jones average and the price of the IJK will rise next year?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
p(a) = .25
p(b) = .4
p(a and b) = .10
find p(a or b)

p(a or b) = p(a) + p(b) - p(a and b)

this becomes p(a or b) = .25 + .4 - .10 = .55

Suppose you are considering the purchase of IJK Corporation. You feel that if the Dow Jones average rises next year, there is an 85 percent probability that IJK stock will go up. You feel also that there is a 70 percent chance that the Dow Jones average will increase next year. What is the probability that both the Dow Jones average and the price of the IJK will rise next year?

p(a) = probability that ijk stock will go up.
p(b) = probability that dow jones average will go up.

the formula to use is:

(a given b) = p(a and b) / p(b)

you are given that p(a given b) is equal to .85.

this means that the probability that ijk stock will go up is .85 given that the dow jones average goes up.

you are given that p(a given b) = .85
you feel that p(b) = .7

based on this feeling, what is the probabililty that the dow jones average will go up and ijk stock will also go up at the same time?

p(a given b) = p(a and b) / p(b) becomes .85 = p(a and b) / .7

solve for p(a and b) to get p(a and b) = .85 * .7 = .595

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