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You are a creating a portfolio of investments for a retiring person. The portfolio consists of...

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You are a creating a portfolio of investments for a retiringperson. The portfolio consists of ten securities. Three of themmust be stocks, and seven of them must be bonds. You can chooseamong ten stocks, and twenty bonds. Answer the following-

  1. If you randomly choose ten securities, what is the probabilitythat the portfolio specification will be met, i.e., you would havethree stocks and seven bonds in the portfolio?

  2. Suppose that you are told that two stocks, GM and GE must be inthe portfolio. Also, you are told that bonds of ATT and Verizonmust be in the portfolio. These are already in the specified set often stocks and twenty bonds. How likely is it that a randomlyformulated portfolio of ten securities will contain these stocksand bonds, and also satisfy the requirements for containing threestocks and seven bonds?

    (Note: the values in this problem are rather large to computemanually. You will be better off using Excel functions such as=permut or =combin for your analysis. If you do use them, writedown the exact expressions you used as part of your analysis).

Answer & Explanation Solved by verified expert
4.0 Ratings (498 Votes)
GivenTotal number of stocks s 10 1Total number of bonds b 20 2Total number of securities n s b 10 20 30 3In the question mentioned portfolio specification 3 of themshould be stocks and 7 of the them should be    See Answer
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