1) Ms.

Perez figures that there is a 30 percent chance that her company will set up a branch office in
Phoenix. If it does, she is 60 percent certain that she will be made manager of this new operation.
What is the probability that Perez will be a Phoenix branch office manager?
Solution: Let, A be the event that the company sets up a branch office in Phoenix and B be the event
that Perez is made the Phoenix manager.
P(A)= 0.3
P(B|A)= 0.6
The desired probability, P(A|B)= P(B)*P(B|A)
= 0.3 *0.6
= 0.18
Hence, there is an 18 percent chance that Perez will be the Phoenix manager (Ans.)

2) An insurance company believes that people can be divided into two classes — those that are
accident prone and those that are not. Their statistics show that an accident-prone person will have an
accident at some time within a fixed 1-year period with probability .4, whereas this probability
decreases to .2 for a non-accident-prone person. If we assume that 30 percent of the population is
accident prone, what is the probability that a new policy holder will have an accident within a year of
purchasing a policy?
Solution: Let, A be the event that the policy holder is accident prone and B be the event that the
policy holder will have an accident within a year of purchase.
P(A)= 0.3
P(AC)= 1-0.3= 0.7
P(B|A)= 0.4
P(B|AC)= 0.2
The desired probability, P(B)= P(A)*P(B|A)+P(AC)*P(B|AC)
= 0.3*0.4+0.2*0.7
=0.26
Hence, the probability that the new policy holder will have an accident within a year of purchasing a
policy is 26 percent (Ans.)

3) In answering a question on a multiple-choice test, a student either knows the answer or she
guesses. Let p be the probability that she knows the answer and 1 – p the probability that she guesses.
Assume that a student who guesses at the answer will be correct with probability 1/m, where m is the
number of multiple-choice alternatives. What is the conditional probability that a student knew the
answer to a question given that she answered it correctly?
Solution: Let, C denote the event that the student answers the question correctly and K denotes the
event she actually knows the answer.
P(K)= p
P(KC)=1-p
P(K∩C)= P(K)*P(C|K)
= p*1
=p
The probability that the student answers correctly, P(C) =P(K)*P(C|K) + P(KC)*P(C|KC)
= p + (1/m)(1-p)
p
The desired probability, P(K|C) = 1
p+( )(1− p)
m

mp
= (Ans.)
1+(1−m) p