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S2 question

For part (ii) of this question
S2 q.jpg

As more than 5 have gone down in price wouldn't it also be that less than or equal to 5 have increased in price. Can we use the previous information X~B(10.0.35) [where X is number of shares gone down in price] to answer this? When I tried I got the anwer of 0.9527 which isn't correct.

Or would I have to use the formula with Y~B(10, 0.65) [where Y is the number of shares gone down in price]?

Thank you!

(edited 10 years ago)

Reply 1

ghostwalker

Original post by IgorYakov

Thank you!

I think you looked at the column for p=0.30 in tables, rather than p=0.35

Edit: And as CTArsenal said - good spot. PRSOM.

(edited 10 years ago)

Reply 2

CTArsenal

You can do this step-by-step, i.e.

Let Y be the number of 10 shares that have gone down in price, so Y~B(10,0.65)

This would mean that you would be looking for P(Y>5), which is the same as P(Y=>6), which is the same as P(X<=4), where X is the number of 10 shares that have gone up in price [X~B(10,0.35)].

(edited 10 years ago)

Reply 3

IgorYakov

Original post by CTArsenal

If more than 5 have gone down in price, that means that less than or equal to 4 have increased in price.

So you'd use the same distribution of X~B(10,0.35), with P(X<=4).

If it's more than 5 wouldn't it be 6, 7, 8, 9 or 10 so we work out less than or equal to 5? The answer gives it for less than or equal to 4 so could you clarify please?

Original post by ghostwalker

I think you looked at the column for p=0.30 in tables, rather than p=0.35

Aah damn! Thank you!

Reply 4

CTArsenal

Original post by IgorYakov

If it's more than 5 wouldn't it be 6, 7, 8, 9 or 10 so we work out less than or equal to 5? The answer gives it for less than or equal to 4 so could you clarify please?

You want to be looking at where less than 5 of the 10 shares have gone up in price, P(X<5) = P(Y>5).

P(X<=5) does not equal P(Y=>6), you can clarify this using an online binomial distribution table :smile: