If 1 out of every 15 stocks in a portfolio performs extraordinarily, then what is the performance of a stock randomly selected from the portfolio?

P(X=x) = \$p^x q^(1-x)\$
where x =0,1
q=1-p

Given probability

p = \$1/15\$

Then q = 1-p

q = \$1 -(1/15)\$

Substitute x=0

P(X=0) = \$(1/15)^0 (1 -(1/15))^(1-0)\$

P(X=0)

\$1 -(1/15) = 14/15\$ = 0.93

Substitute x=1

P(X=1) = \$(1/15)^1 (1 -(1/15))^(1-1)\$

P(X=1)

\$(1/15)\$

Probability of success

selected citizen being a business owner = 0.07

probability of failure

selected citizen not being a business owner = 0.93

Answer

C