An investor purchased 100 shares of 5/3 Bank stock and 100 shares of Santee Cooper Electric stock. The probabi

An investor purchased 100 shares of 5/3 Bank stock and 100 shares of Santee Cooper Electric stock. The probability the bank stock will appreciate over a year is .70. The probability the electric utility will increase over the same period is .60. A)What is the probability the bank stock appreciates but the utility does not? B)What is the probability at least one of the stocks appreciates?

When doing probability problems involving independent items, to determine the probability of both independent things happening, you must multiply the probability of item 1 times the probability of item 2. Even though the problem doesn't explicitly state it, it's probably intended that the performance of these two stocks is to be considered independent.

The other principle that you must apply to this problem is this: the probability something happens and the probability it doesn't happen is equal to 1.

a)
Probability bank stock appreciates = 0.70
Probability electric utility does not appreciate = 1 - 0.60 = 0.40

Probability bank apprecaites AND electric utility does not = 0.70 * 0.40 = 0.28

b)
Here's where things get tricky. If you multiply 0.60 times 0.70 = 0.42, you will be getting the probability that BOTH stocks appreciate - THIS IS THE WRONG ANSWER! What you want is if at least one stock appreciates.

Therefore you must consider the problem from another angle. The probability that at least one stock appreciates is the same as 1 - (the probability that neither stock appreciates).

Probability electric utility does not appreciate = 1 - 0.60 = 0.40
Probability bank stock does not appreciate = 1 - 0.7 = 0.30
Probability that neither stock apprecaites = 0.40 * 0.30 = 0.12

Probability that at least one stock apprecaites = 1 - (probability that neither stock appreciates = 1 - 0.12 = 0.88


(And let's be honest here - this question really belongs in the homework category, not "Personal Finance".)

The probability that one increases is .70 X .60 = .42

The probability of the bank stock increasing .7 and the Utility not increasing 1 - .6 =.4 .4 x .7 = .28

you got better liuck with the shares that isnt the banks not all bamks make it