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Probability Theory and Stock Analysis

The document discusses probability theory concepts including addition theorem, conditional probability, and multiplication theorem. It provides examples of calculating probabilities of events and conditional probabilities. Index numbers are also introduced as a way to measure changes in price or quantity compared to a base year.

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29 views3 pages

Probability Theory and Stock Analysis

The document discusses probability theory concepts including addition theorem, conditional probability, and multiplication theorem. It provides examples of calculating probabilities of events and conditional probabilities. Index numbers are also introduced as a way to measure changes in price or quantity compared to a base year.

Uploaded by

anveshvarma365
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Probability Theory:

Addition Theorem: for Two Events A,B


P(AUB) = p(A)+P(B)-P(AnB)
U- Which mean atleast

Q1) The odds in favour of price of a stock going down are


5:7, The odds in favor of price of the stock going up? Find
the probability price of a stock remains same?
Let A is a event that price of the stock going down. The odds
in favor of A are 5:7, P(A) = 5/12
Let B be the event that price of the stock going up
The odds in favor of r3 are 3:5
P(B)=3/8
The probability that the price of the stock remain sale =
P(ĀnB)
=P(AUB)
=1-P(AUB)
1-[P(A)+P(B)-P(AnB)]
=1-(5/12+3/8-0)
=1-(0.42-0.38)
=1-0.80
=0.20
Q2) A problem is given to two students X & Y.
The odds in favor of X solving the problem are 4:5
The odds against Y solving the problem 7:2
Find the chance of the problem getting solved if both try
independently?
The odds in favor of X solving the problem are 4:5
= P(X)= 4/9
The odds against Y solving the problem are 7:2
The probability that the problem will get solved in
=P(AUB)=P(A)+P(B)-P(AnB)
=4/9+2/9-P(A)+P(B)
=4/9+2/9-4/9*2/9
=0.44+0.22-0.44*0.22
=0.66-0.096
=0.564~ 56%

Q3) Find P(A) =1/2


P(B)=1/3
P(AUB)=2/3
=P(AUB)=p(A)+p(B)-P(AnB)
=2/3=1/2+1/3-P(AnB)
P(AnB)=1/2+1/3-2/3
Conditional Probability: The probability of occurance of an
events based on sum of events is called Conditional
Probability. Its donated by P(B/A) – Probability of occurance
of based on A
If A & B are Independent P(B/A) =P(A), P(A/B)=P(B)
Multiplication Theorem: For events A,B
P(AnB)=P(A)P(B/A)
Or
P(B)P(A/B)
Q4) A random experiments is two events A,B P(A) = ½, P(B)
= 1/5
P(AUB)=13/2
Then find P(B/A), P(A/B)

INDEX NUMBERS:
Index Numbers can be with respect to price or quantity they
indicate increase or decrease in the price or in the quantity of
present year are with respect to a year of reference.
Index numbers basically are use to know cost of living, to
know inflation, to fix the salaries etc.
With respect to the year 2019 the cost of living index number
for the year 2024 is 148 comment?
With respect to the year 2020 the quantity index number for
2024 is 75 comment?

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