There are three motors available to repair Ralph’s vacuum cleaner. Motor #1 has a 65% chance of breaking by the end of the week. Motor #2 has a 35% chance of breaking by the end of the week. Motor #3 has a 5% chance of breaking by the end of week. Suppose that Ralph randomly chooses one of the three motors so that each is equally likely, and then the motor does break by the end of the week. What is the conditional probability that Ralph installed motor #1?

0.619

Step-by-step explanation:

from the question we have the following data:

probability of motor 1 breaking = 65% = 0.65

probability of motor 2 breaking = 35% = 0.35

probability of motor 3 breaking = 5% = 0.05

since we have 3 motors the probability of any of them breaking down is  =

but what the question requires from us is the conditional probability of the first one being installed

we have to solve this questions using bayes theorem

such that:

=

=

= 0.618966

approximately 0.619

therefore the conditional probability ralph installed the first motor is 0.619

required rate of return = 0.166 = 16.6%

step-by-step explanation:

under the capital asset pricing model (capm), the required or expected rate of return for a particular security or asset is given using the formula:

required rate of return = risk-free rate + beta*(market risk premium)

we are given that;

risk-free rate = 4% = 0.04

beta = 1.4

market risk premium = 9% = 0.09

we simply plug these values into the above formula;

required rate of return = 0.04 + 1.4*(0.09)

required rate of return = 0.04 + 0.126

required rate of return = 0.166 = 16.6%