Four Red Cards Are Numbered 1, 2, 3, and 4

question 86

Short Answer

Four red cards are numbered 1, 2, 3, and 4. Three black cards are numbered 5, 6, and 7. The cards
are placed in a box and one card is selected at random. What is the probability that a red card was
selected given that the number on the card was an even number?

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Definitions:

Risk Premium

The additional return an investor demands for taking on a higher risk compared to a risk-free asset, indicating the compensation for bearing extra risk.

Principle of Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize risks.

Efficient Market

A financial market theory stating prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Concentrating Investment

Allocating a significant portion of an investment portfolio to a single investment or a small group of investments, increasing potential risk and return.