One theory regarding the Dow Jones Industrial Average is that it is likely to raise throughout U.S. presidential election years. From 1964 through 2004, the Dow Jones Industrial Average raised in 9 of the 12 U.S. presidential election years. Assuming that this indicator is a random event with no predictive value, you would expect that the indicator would be correct 50% of the time.
a. What is the probability of the Dow Jones Industrial Average increasing in 9 or more of the 11 U.S. presidential election years if the true probability of an increase in the Dow Jones Industrial Average is 0.50?
b. What is the probability of the Dow Jones Industrial Average increase in 9 or more ot the 12 U.S. presidential election years if the probability of an increase in the Dow Jones Industrial Average is 0.75?