THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
The probability that interest rates on housing loans will go up in the next 6 months is estimated to be 0.20.The probability that house sales will decrease is estimated to be 0.6.The probability that interest rates will go up and house sales will decrease is estimated to be 0.15.
-The probability of not an increase in interest rates and not a decrease in house sales is:
A)0.50
B)0.35
C)0.20
D)0.05

Question

Quizplus · Accepted Answer

The probability of not an increase in interest rates is (1-0.20) = 0.80. The probability of not a decrease in house sales is (1-0.6) = 0.40. The probability of both not an increase in interest rates and not a decrease in house sales is 0.80 x 0.40 = 0.32. The complement of this event (not an increase in interest rates and not a decrease in house sales) is an increase in interest rates or a decrease in house sales, which has a probability of 1-0.32 = 0.68. However, this answer choice is not given, so the best choice is B, which is the closest to the complement probability of 0.68.