Answer to Question #10006 in Statistics and Probability for Raghav

Question

A stock market analyst examined the prospects of the shares of a large number of corporations. When the performance of these stocks was investigated one year later, it turned out that 25% performed much better than the market average, 25% much worse, and the remaining 50% about the same as the average. Forty percent of the stocks that turned out to do much better than the market were rated “ good buys” by the analyst, as were 20% of those that did about as well as the market and 10% of those that did much worse. What is the probability that a stock rated a “good buy” by the analyst performed much better than the average?

Answer 1

The total amount of "good buys" (as % of total)=40%*25%+50%*20%+25%*10%=22.5%
Number of "good buys" that perfomed much better than average: 40%*25%=10%.