- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 4. Common Probability Distributions
- Subject 4. Discrete and Continuous Uniform Distribution
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 |