In symbols, you were asked to calculate P(NA|ND).
Q Is this one of the probability items on the tree?
A No. We know this because a branch corresponding to P(NA|ND) would go from ND to NA:
But there is no such branch on the tree.
Q So how do we calculate it?
A We go back to the formula for conditional probability
P(NA|ND) | = | P(ND) |
Here is the tree diagram with both these probabilities shown:
FDA approves & stock price does not double |
0.04 |
|||
FDA does not approve & stock price does not double | 0.18 |
P(NAND) |
||
P(ND): | 0.22 |
Therefore,
P(NA|ND) | = | P(ND) |
||
= | 0.22 |
= | 9 11 |
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