Chapter PIV, Problem 18RE

(a)

To determine

To explain: this confirms the recommendation that people can spend heavily because the demand rarely decreases 3 years in a row on the basis given information.

Explanation of Solution

Given:

Two consecutive years of loss is 8 times the total.

The number of times the demand has risen during the following year = 6

The probability that the market grew is $\frac{6}{8}$ , which is 75% times. The probability lies in reasonableness. It thus confirms the advice.

(b)

To determine

To explain: that this is important to the evaluation of the advisors' statistical reasoning.

Explanation of Solution

The probability stocks have risen since.

  $\begin{array}{c}{\text{Year}}_{1872}=\frac{95}{130}\\ =0.73\end{array}$

The demand rose about 73 percent in the third year. It is similar to real probability, which further supports the advice.