Page 55 - FINAL CFA SLIDES DECEMBER 2018 DAY 3
P. 55

LOS 9.n: Calculate and interpret an                             Session Unit 2:
   updated probability using Bayes’                                9. Probability Concepts
   formula, p.191



                                                          But P(O) = P(O | I) × P(I) + P(O | IC) × P(IC)

                                                           P(O) = (0.6 × 0.3) + (0.4 × 0.7)

                                                           P(O) = 0.46





                                       Now the updated probability of the increase in prices, given that
                                       Electcomp expands overseas, can be computed:



















    Meaning?



                              If the new information of “expand overseas” is announced, the prior

                              probability estimate of P(I) = 0.30 must be increased to 0.3913.
   50   51   52   53   54   55   56   57   58   59   60