CFA Practice Question

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CFA Practice Question

Recent history has shown that movements of more than 3% in the Dow Jones Industrial Average occur in 2% of the trading days. What is the probability that within the next 30 trading days there will be one or more days in which the average will move more than 3%?
A. 0.4545
B. 0.0836
C. 0.2876
Explanation: 1 - 0.9830 = 0.4545

User Contributed Comments 4

User Comment
tabulator We deduct from 1 the probability that there will be no 3% movement in the Dow. Thus we obtain the probability that there will be a movement at one or more days.
The probability is obtained from the binomial probability formula.
chamad Can some one explain!
StanleyMo hello chamad,

you can consider this:
P(0)= 30C0 (0.02)^0 (0.98)^30 = 0.54548
= probability (0 days trading less than 3%)

to get 1 or more days, you minus 1 - P (0)
gaetmichel thx
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