Question

A financial analyst estimates that the probability that the economy will experience a recession in the...

A financial analyst estimates that the probability that the economy will experience a recession in the next 12 months is 25%. She also believes that if the economy encounters a recession, the probability that her mutual fund will increase in value is 20%. If there is no recession, the probability that the mutual fund will increase in value is 75%.

  1. Find the probability that the mutual fund’s value will increase.

  1. If there is not a recession what is the probability that the mutual fund does not increase in value?
  1. What is the probability that there isn’t a recession and the mutual fund increases in value?

  1. What is the probability of no recession in the next 12 months?
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Answer #1

Define the following events:

A: event that  the economy will experience a recession in the next 12 months

B: event that  her mutual fund will increase in value

According to question,

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