Iift 2020 Question 13
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IIFT
Probability that recession will happen = 0.3 and probability that value will increase in this case = 0.2
Expected probability of mutual fund value increase in this case = 0.3 *0.2 = 0.06
Probability that recession will not happen = 1 - 0.3 = 0.7 and probability that value will increase in this case = 0.75
Expected probability of mutual fund value increase in this case = 0.7*0.75 = 0.525
Hence, total expected probability that mutual fund value will increase = 0.585