Bank Exams Questions

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Creditors and debtors:

During inflation creditors lose because they receive in effect less in goods and services than if they had received the repayments during a period of low prices. Debtors, on other hand, as a group gain during inflation, since they repay their debts in currency that has lost its value.The aggregate volume of internal trade tends to increase during inflation due to higher incomes, greater production and larger spending. But the export trade is likely to suffer on account of arise in the prices of domestic goods.

The same currency unit will now buy less goods and services.But the bondholders lose as they get a fixed interest the real value of which has already fallen.

A red ball can be drawn in two mutually exclusive ways

 (i) Selecting bag I and then drawing a red ball from it.

(ii) Selecting bag II and then drawing a red ball from it.

Let E1, E2 and A denote the events defined as follows:

E1 = selecting bag I,

E2 = selecting bag II

A = drawing a red ball

Since one of the two bags is selected randomly, therefore 

P(E1) = 1/2  and  P(E2) = 1/2

Now, PAE1 = Probability of drawing a red ball when the first bag has been selected = 4/7

  PAE2  = Probability of drawing a red ball when the second bag has been selected = 2/6

 Using the law of total probability, we have 

 P(red ball) = P(A) = PE1×PAE1+PE2×PAE2 

                          = 12×47+12×26=1942