Stock index increase 3 out of 6 months last year. What is the total probability of increasing for 5 or more out of 6 months this year? Thanks in advance.
I don’t know if this is right, but I think it’s a binomial distribution problem (either index goes up or down) Last year the probability of stock index increasing was 3/6 = 0.50 Using the formula, you need P(5) + P(6) which is the probability of increasing five or six times. ( N Choose x ) * (P ^x)*((1-P)^(N-x)) Don’t have my calculator with me but plug in for first case X = 5, N = 6 For second case, X = 6, N = 6 Add the two together.
I think your formula is right. a) 6C3/2^6 = 20/64=0.3125 b) 6C5/2^6 + 6C6/2^6 = 7/64 = 0.1094 or 11%approx Thanks
Got it. Many thanks.