An airline is trying to determine whether the price of fuel will rise or fall in the future. They believe there is a 65% chance that the cost of fuel will fall. However, they are risk-averse and prefer to hire an analyst. The airline execs have found that when the price of fuel fell, the analyst correctly predicted the decrease in cost 90% of the time. When the price of fuel rose, the analyst correctly predicted the increase 75% of the time. The execs hired the analyst and he issued a report predicting that the cost of fuel would fall. What is the probability the price of fuel will fall given this prediction. Round to the answer to 2 decimal places.

a) .65
b) .68
c) .74
d) .87

Solution Summary

This solution provides calculations for probability.

Step-by-Step Method for the Calculation of Probabilities. 1. You pull out one randomly taken card from a standard deck of cards. Find the probability that the ...

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... The solution provides step by step method for ... of testing of hypothesis, probability, confidence interval ... Formula for the calculation and Interpretations of the ...

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... For a model with n steps, we model th in ... u 1.03038192 d 0.97035337 p 0.50000113 1) Calculate u, d ... $1.68 $0.00 0.00% binomial product: the probability of having ...

... intervals, or steps. ... The option prices at eutral valuation ( calculations are based on the ... r down to dS with probability (1 − p). asset price at each node. ...

... of the Test Statistic This step is the calculation of the probability value (also known as the p-value) which is the probability of your test statistic. ...