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# Pop Quiz

Discussion in 'Chit Chat' started by PAPA ROACH, Nov 11, 2009.

1. ### PAPA ROACH

Saw this question on another board, found it fascinating how many people got it wrong.

1. What has more value?
A.) A contract that pays you \$1,000 if the stock market goes down 10% on any given day in the next year

B.) A contract that pays you \$1,000 if the stock market goes down 10% on any given day in the next year due to a terrorist act.

2. A test of a disease has a 5% false positive rate. The disease strikes 1/1,000 of the population. A patient's test is positive. What is the probability of the patient being stricken with the disease?

You must provide the answer no multiple choice question.

2. ### killthesunshine

A is more likely than B less likely due to the conditional propositon, and the probability of the disease in #2 is somewhere around 2%.

A
and
95%

ditto!

HBA

5. ### CaptainObvious

1a and 1b are of equal value. Probability has nothing to do with value.
2. Probability is 1/1,000 just like the question states.

I'm a proud high school grad 40 years ago which is probably the equivalent of a PHD today. I did go to college a couple if times, but dropped out do to shear boredom.

6. ### bellman

Killthesunshine did just that to your pop-quiz, didn't he? First to respond got it right without really having to think about it.

The first question iseasy for most adults and children alike, A (assuming they are equally efficiently price of course).

The second question most people would get wrong. The answer is 1.9%.

I have a BS and a BA.

Great answers bellman! I think those are the correct answers. Could you please show us how you calculated 1.9%?

Thanks!

PA

8. ### bellman

My answer assumed that the false positive rate was equal to the false negative rate. If the false negative rate is 0 (highly unlikely) then 1.96% is the answer. If the false negative rate is assumed to be equal to the false positive rate, then 1.86% is correct.

Divide the actual number of false positives by the total number of positives. Or the frequency of false positives by the frequency of all positives.

0.95/((999*0.05)+0.95) = 1.86%