In a bolt factory, machines 1,2, and 3 respectively produce 20%, 30% and 50% of the total output. of their respective outputs 5%, 3%, and 2% are defective. a bolt is selected at random.
a. what is the probability that is defective?
b. given that is defective, what is the probability that it was made by machine 1?

a. 1/10 or 10%

b. 1/2 or 50%

Step-by-step explanation:

Since the combination of machines 1, 2 and 3 produce 100% of the total output when added together, then the probability of choosing a bolt at random that is defective is: 5 + 2 + 3 = 10% out of 100% or 10/100, which is 1/10 or 10%.

If the bolt that is choosen at random is defective, than the probability that it came from machine 1 is 5/10 or 1/2 which is also 50%.

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%