An Investment Advisor Recommends the Purchase of Shares in Infogenics

question 102

Essay

An investment advisor recommends the purchase of shares in Infogenics, Inc. He has made the following predictions:
P(Stock goes up 20% | Rise in GDP) = .6
P(Stock goes up 20% | Level GDP) = .5
P(Stock goes up 20% | Fall in GDP) = .4
An economist has predicted that the probability of a rise in the GDP is 30%, whereas the probability of a fall in the GDP is 40%.
a. Draw a tree diagram to represent this multiple-step experiment.
b. What is the probability that the stock will go up 20%?
c. We have been informed that the stock has gone up 20%. What is the probability of a rise or fall in the GDP?

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Definitions:

Microvilli

Microscopic cellular membrane protrusions that increase the surface area for absorption or secretion in various epithelial cells.

Lacteals

Specialized lymphatic capillaries located in the intestinal villi, involved in the absorption of dietary fats.

Photomicrograph

An image taken with a microscope to show a magnified view of microscopic structures.

Simple Squamous Epithelium

A single layer of flat cells lining surfaces involved in substance exchange, like blood vessels and lung alveoli.