
Explanation:
This question relies on Bayes' theorem and conditional probability. We are trying to find the conditional probability , where:
Given in the question:
The formula for conditional probability is:
Ultimate access to all questions.
Q.40 An analyst covers two companies – Xela Ltd. and Yena Inc. Yena Inc. is a subsidiary of Xela. The probability that the return on equity (ROE) of Xela exceeds 20% this year is 0.10, while the probability that the ROE of Yena exceeds 30% is 0.05 for the same time period. If the probability that the ROE of Xela exceeds 20% and the ROE of Yena exceeds 30% is 0.02, then the probability that the ROE of Yena exceeds 30% given that the ROE of Xela has already exceeded 20% is closest to:
A
0.20
B
0.10
C
0.05
D
0.025
No comments yet.