Question

A municipal bond firm has three rating categories (A, B and C). Suppose that in the past year, of the municipal bonds issued throughout the USA, 55% were rated A, 25% were rated B and 20% were rated C. Of the municipal bonds rated A, 50% were issued by cities, 40% by suburbs, and 10% by rural areas. Of the municipal bonds rated B, 60% were issued by cities, 20% by suburbs, and 20% by rural areas. Of the municipal bonds rated C, 90% were issued by cities, 5% by suburbs, and 5% by rural areas.

a) Create the appropriate sample space along with calculated probabilities for this problem.

b) Are events independent? Why or why not? [plz answer using independent event formula: P(A I B) = P(A)]

Answer 1