Question: James Choi, David Laibson, and Brigitte Madrian conducted an experiment to study the choices made in fund selection. Suppose 100 undergraduate students and 100 MBA

James Choi, David Laibson, and Brigitte Madrian conducted an experiment to study the choices made in fund selection. Suppose 100 undergraduate students and 100 MBA students were selected. When presented with four S & P 500 index funds that were identical except for fees, undergraduate and MBA students chose the funds as follows:

If a student is selected at random, what is the probability that he or she

a. Selected the lowest or second lowest cost fund?

b. Selected the lowest cost fund and is an undergraduate?

c. Selected the lowest cost fund or is and undergraduate?

d. Given that a student is and undergraduate, what is the probability that he or she selected the highest cost fund?

e. Do you think undergraduate students and graduate students differ in their selection? Explain.

STUDENT GROUP FUND Undergraduate MBA Lowest-cost fund 19 19 Second-lowest-cost fund Third-lowest-cost fund Highest-cost fund 37 40 17 23 27 18

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