Question: Answer the following question using Bayes' rule: p(A|B) = p(B|A)p(A) / p(B|A)p(A)+p(B|A)p(A) You are a regulator for the Securities and Exchange Commission who is in

Answer the following question using Bayes' rule: p(A|B) = p(B|A)p(A) / p(B|A)p(A)+p(B|A)p(A)

You are a regulator for the Securities and Exchange Commission who is in charge of investigating whether a company has violated laws against insider trading. Your initial investigation has revealed no evidence of wrongdoing. However, you know that it is difficult to uncover secret activity and that only 1 of the investigations will correctly identify guilt. Of course, if the company is innocent, there is no chance of finding anything. You also estimate that 1 in 5 instances of trading similar to this one is actually illegal. What is the probability that the company is guilty, given that your initial investigation found no evidence of wrongdoing?

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