Question

The president of a major corporation said, “There is a 50% chance our firm will earn...

The president of a major corporation said, “There is a 50% chance our firm will earn a profit, a 30% chance it will break even and a 20% chance it will lose money next quarter.”

a. Using the addition rule, determine the probability the firm will not lose money next quarter?

b. Use the complement rule to determine the probability the firm will not lose money next quarter?

Are the results consistent or inconsistent?

Math   Statistics-And-Probability   
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Answer #1

Probability that firm will earn a profit next quarter = 50% = 0.5

Probability that firm will be at break even next quarter = 30% = 0.3

Probability that firm will lose money next quarter = 20% = 0.2

a) Addition rule

Probability the firm will not lose money next quarter = Probability that firm will earn a profit next quarter + Probability that firm will be at break even next quarter = 0.5 + 0.3 = 0.8

b) Complement rule

Probability the firm will not lose money next quarter = 1 - Probability that firm will lose money next quarter = 1 - 0.2 = 0.8

Since, two values are equal from both the rules, therefore, results are consistent.

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