CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

The manager of a pension fund determines that during the past five years 85 percent of the stocks in the portfolio have paid a dividend and 40 percent of the stocks have announced a stock split. If 95 percent of the stocks have paid a dividend and/or announced a stock split, the joint probability of a stock paying a dividend and announcing a stock split is closest to ______.
A. 25%
B. 30%
C. 40%
Explanation: The probability that at least one of two events will occur is the sum of the probabilities of the separate events less the joint probability of the two events.

P(A or B) = P(A) + P(B) - P(AB)
95% = 85% + 40% - P(AB); therefore P(AB) = 30%

User Contributed Comments 2

User Comment
aleakos Is this right? It says the probability that a stock has paid a dividend AND/OR paid a stock is 95 percent. Doesn't this mean that the p(a or b)+ p(ab)=95%, or am I being dumb?
aleakos Nevermind I'm being dumb, or is inclusive
You need to log in first to add your comment.