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Worked Examples · Example 14

Q.An investment banker finalizes the list of specific entities worthy of investment in each of the three instruments mentioned below: 3 Public Ltd. companies for direct equity investment, 5 Mutual fund schemes, 2 Banks for Fixed Deposit (F.D). In how many ways the investment can be made if the board decides to

(i) invest the entire fund in one entity (i.e., company, scheme or bank)
(ii) invest in one entity of each of the three instruments.
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Part (i) uses the addition principle (one entity out of all groups combined); part (ii) uses the multiplication principle (one entity chosen from each of the three groups simultaneously).

Addition (OR) Principle: mutually exclusive choices add: m1+m2+⋯m_1+m_2+\cdots. Multiplication (AND) Principle: independent, simultaneous choices multiply: m1×m2×⋯m_1\times m_2\times\cdots.

  1. Entities available: 33 companies (equity), 55 mutual fund schemes, 22 banks (FD).
  2. (i) Entire fund in ONE entity: the board picks exactly one entity from the combined pool of 3+5+2=103+5+2=10 entities — this is an either/or choice, so use addition: 3+5+2=103+5+2=10. …

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