Alison has all her money invested in two mutual funds, A and B. She knows that there is a 40% chance that fund A will rise in price, and a 60% chance that fund B will rise in price given that fund A rises in price. What is the probability that both fund A and B will rise in price?

A. 0.24

B. 0.40

C. 0.76

D. 1.00

A. 0.24

Explanation:

From the question,

The probability that mutual funds A will rise is 40 %, i. e., P (A) = 0.40

The second statement given is, the probability of rise in B with A, is 60%, i. e., P (B | A) = 0.6

Therefore, to calculate the probability that both funds will increase is given by P (B n A).

Since,

P (B | A) = P (B n A) / P (A)

Now, putting the respective values -

0.6 = P (B n A) / 0.4

rearranging,

P (B n A) = 0.6 * 0.4

P (B n A) = 0.24

probability that both the fund A and fund B will rise in price = 0.24.