Day traders typically buy and sell stocks or other investmen

Day traders typically buy and sell stocks (or other investment instruments) during the trading day and sell all investments by the end of the day. The following table shows the closing prices on November 20, 2011, of 12 stocks selected by your broker, Prudence Swift, as well as the change that day. On the morning of November 20, 2011, Swift advised you to purchase a collection of three tech stocks and one non-tech stock, all chosen at random from those listed in the table. You were to sell all the stocks at the end of the trading day. (a) How many possible collections are possible? collections (b) You tend to have bad luck with stocks-they usually start going down the moment you buy them. How many of the collections in part (a) consist entirely of stocks that declined in value by the end of the day? collections (c) Using the answers to parts (a) and (b), what would you say your chances were of choosing a collection consisting entirely of stocks that declined in value by the end of the day? (Round your answer to two decimal places.)

Solution

a) 3 tech stocks and 1 non tech stock should be chosen at random from 6 tech stocks and 6 non tech stocks.

Hence no of ways = 6C3(6C1) = 120 ways

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b) 3 collections declined in value in tech stock and 3 in non tech stock.

Hence choosing from this has 3C2 (3C1) = 9 ways

c) Prob =  = 0.07