# Probability Concepts - need help with Ex. 4

Folks, w.r.t.: Volume 1 - page 372 - Example 4 - Solution to 2, what is the concept used here? I am trying to understand, on what basis do the authors arrive at: “The probability is 0.025 = 0.45(0.45)” ? The question only states that probability of EPS decreasing or remaining unchanged is 0.45. It does not state that these two are independent events. So wondering what keyword in the question indicates independent probabilities of the events? TIA, hnhegde

does it really need to say that they are independent specifically. think about it: if EPS remained unchanged - did it decrease? if it decreased - did it remain unchanged… then re-ask your question to yourself.

^ that would mean they are not independent so there is more to this question than that. (Mutually exclusive means decidedly not independent)

@cpk123, question states: …and in 45 percent of quarters EPS has decreased or remained unchanged sequentially., which is more on the lines of: P(A or B) = 0.45 . How can we conclude that P(A) = 0.45 and P(B) = 0.45 ? Rgds, hnhegde

what they are asking for is prob that eps decreases or remains unchanged in the NEXT TWO QUARTERS. they become independent - bcos it is 2 quarters. and ans is 0.2025 = 0.45 * 0.45

ahh! touche. Thanks,