Question

(Conditional Probability) In Finance, a common nomenclature for more aggressive and more conservative investors’ attitudes towards the market are bull and bear positions. While in the first the individual investor/institution takes the first move in the hopes that some asset price will rise, in the second, the subject bets that the market price of a stock will go down or stay flat. A recent survey discovered that 64% of investors who adopted a bull position lost their invested wealth in less than 6 months after the initiative. Only 11% of bear investors happen to lose their invested wealth in less than 6 months. Suppose that in the oil stock market approximately 26% of its investors belong to bear category. If an individual investor in this market lost her wealth in less than half a year, what is the probability that she is a bull investor? Hint 1: there is more than one approach to answer this question. There is no better or worse approach, as long as you can produce the right answer. Hint 2: one approach is through a probability tree. Hint 3: Do not forget the measurement units.

Answer 1

Ans! It is given that 26% of the Investors in oil stock marcket belong to the bear category which mea - 900-26=74% of the Investors belong to the ball category. According to the survey 64% of the bude Investors loss their wealth in dess than half a year is : 10.74X0:64 = 0.6736(05) 47.367.