EXAMPLE 3.3.16 SOLUTION

Here is what actually occurred: There were seven stocks on the list from GIC. For each stock, there are two possible outcomes: Either it will or will not increase in value by 5% as of July 1. Thus, for the seven stocks combined, there are

(2)(2)(2)(2)(2)(2)(2) = 128 possible outcomes. This means that if GIC mails different solicitations to 128 prospective clients, they can guarantee that exactly one client (Homer, as luck would have it in this case) will wind up with all seven predictions correct; there will be another 7 clients who had received solicitations on which 6 of the 7 predictions turn out to be

correct [because C(7,6) = 7].

On May 1, these 8 people are the only ones who receive follow-up letters. They have no idea that there was no market expertise whatsoever involved in the predictions, or that there were another 120 people who were contacted and given predictions that turned out to less than spectacular, or even dismal.

A less gullible investor might have asked:

How many other people were contacted?

What are the names and addresses of all the other people who were contacted?

May I see a complete list of your clients (so that I may randomly contact some of them for reference purposes)?