## Explanation for the solution of this question

tell2rekha
Posts: 3
Joined: Wed Oct 22, 2014 5:58 pm

### Explanation for the solution of this question

Sam, an analyst at Alpha Catalyst fund, finds out the following statistics based on historical data. Only 20% of subsidiaries of Alpha Catalyst are in the ‘Elite list’ published by their newsletter. The rest of subsidiaries are termed ‘Ordinary’. The probability that an elite company records a profit in any given year is 80%. For an ordinary company, there is as much chance to make a profit as it is to make a loss. For both the type of companies, the probability of making a profit is independent from one year to the next.
Now consider a subsidiary which was established 2 years ago and has recorded a profit in both the years. What is the probability that the subsidiary is in elite list now?

edupristine
Finance Junkie
Posts: 981
Joined: Wed Apr 09, 2014 6:28 am

### Explanation for the solution of this question

Please mention the exact source of this question.