Probability QBank Question particular, increase, between

Andreas42

The number of days a particular stock increases in a given fiveday period is uniformly distributed between zero and five inclusive. In a given fiveday trading week, what is the probability that the stock will increase exactly three days?
A) 0.333.
B) 0.600.
C) 0.167.
Answer given in schewser answers is C. Can someone explain how it comes down to C?

dkishore1

One tip for statistics questions is to learn to read what they are asking. Make sure you understand exactly what they are explaining before thinking about the computation. This is common at lower division levels which this quant is at.

cross-ied

Thankyou. That’s a good explanation. I was headed in the obviously incorrect 1/6*1/6*1/6 direction.

YAhmed

I thought that at first, but you’re overthinking it. The key term is uniformly distributed, which means all outcomes are equally likely. This is obviously not a real world example, but the probability of it increasing 3 days is equally likely as it only increasing 1 day or 2 days. Therefore the probability is 1/6, as we only want one outcome and there are a possible six that might happen.

prashantsahni

Guys,
I dont get this …it has to increase in three days (like monday, tue, wed and so on), so it should be 1/ * 1/6 * 1/6 = 1/216
cos each has an equal probability…

sabre

I was forgetting 0 and thinking 1/5.
Wouldn’t it be wonderful if a stock had to increase at least one day per week?
If you had gotten to Friday morning and it hadn’t increased yet…

pacmandefense

Thanks for the explanation and clarifying my confusion. I had thought it is more like 1/6 * 1/6 * 1/6. Now it all makes sense.

brainsX

You could reword this question as follows: A dice has six sides, and there is equal probability of rolling 16. What is the probability of rolling a three?
The answer is obviously 1/6. For the question above, the thing to remember is the term ‘uniformly distributed’. Because of that, there is equal probability for all outcomes. Since there are six outcomes, the probability of one of them is 1/6.