Help

In future, please do not head up questions ‘help’ but state the topic of the question. (The reason is so that all users can get the benefit of the answers easily.)

I do not have the BPP Study Text – only the Revision Kit.
However I have the question in the Revision Kit (it is a past exam question).

To get the probability of two things both happening, you multiply the individual probabilities together.
So, for example, the probability of 8,000 in the first year and 7,000 in the second year (and so a total of 14,500 – there was already an overdraft of 500)) is 0.10 x 0.20 = 0.02
Similarly, the probability of 8,000 in the first year and 3,000 in the second year (so a total of 10,500) is 0.10 x 0.50 = 0.05
Also, the probability of 8,000 in the first year and (9000) in the second year (so a total of (1500) ) is 0.10 x 0.20 = 0.02.

You need to do the same for all 9 possible combinations.

When you have done that, then the probability of a negative cash balance is the total of all the probabilities of those combinations ending up with a negative balance.

Similarly, the probability of exceeding the overdraft limit of 2,000 is the total of the probabilities for all combinations that end up with a balance of more than (2000)

The question says that the overdraft limit is $2,000.

The only closing balances that exceed this limit are the overdraft of 5,500 (probability 0.12) and the overdraft of 11,500 (probability of 0.06).

The overdraft of 1,500 does not exceed the 2,000 limit.