A mutual fund company offers its customers a variety of funds: a money-market fund, three different bond funds (short, intermediate, and long-term), two stock funds (moderate and high-risk), and a balanced fund. Among customers who own shares in just one fund, the percentages of customers in the different funds are as follows. Money-market 22% High-risk stock 17% Short bond 11% Moderate-risk stock 25% Intermediate bond 12% Balanced 8% Long bond 5%

Question Continuation

A customer who owns shares in just one fund is to be selected at random.

a. What is the probability that the selected individual owns shares in the balanced fund?

b. What is the probability that the individual owns shares in a bond fund

Answer:

a. 0.08

b. 0.28

Step-by-step explanation:

Given

Money-market 22%

High-risk stock 17%

Short bond 11%

Moderate-risk stock 25%

Intermediate bond 12%

Balanced 8%

Long bond 5%

a. What is the probability that the selected individual owns shares in the balanced fund?

Let P (Balanced) = The probability that the selected individual owns shares in the balanced fund

P (Balanced) is given as 8% from the above table

So, P (Balanced) = 8/100

P (Balanced) = 0.08

b. What is the probability that the individual owns shares in a bond fund

Let P (Bond) = The probability that the individual owns shares in a bund fund

P (Bond) = P (Short Bond) + P (Intermediate Bond) + P (Long Bond)

P (Short Bond) = 11%

P (Intermediate Bond) = 12%

P (Long Bond) = 5%

So, P (Bond) = 11% + 12% + 5%

P (Bond) = 28%

P (Bond) = 0.28