Specifically, the probability found in reading 8. It’s one of the few sections in the book I am genuinely defeated by, just as it was on the GMAT.
Anyways, here is one such problem that I am having difficultly with:
State of economy probability of economic state stock performance conditional probability stock performance
Good 0.30 Good 0.60
Neutral 0.50 Good 0.30
Poor 0.20 Good 0.10
So here are some problems I am having a tough time figuring out:
#15.) “What is the conditional probability of having good stock performance in a poor economic environment?”
The book says the answer is 0.10, so,
0.10 = P(AB) / P(B)
#18.) “Given that the stock had good performance, the probability the state of the economy was good is closest to?”
This is a Bayes formula. Bayes formula is:
P(A | B) = [P(B | A) / P(B)] * P(A)
However, when solving for the problem, the book solves for P(B | A) as (0.6)*(0.3), which seems to be the joint probability formula, not the conditional probability formula. Why is this?
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