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CFA Level 1
Quantitative Methods

Applying Bayes' Theorem to Medical Testing

Medium Probability Concepts Bayes Theorem

Consider a medical test for a disease that is known to be 95% accurate, meaning it correctly identifies 95% of those who have the disease (true positives) and has a 5% false positive rate for those who do not have the disease. Additionally, the prevalence of the disease in the general population is 1%. What is the probability that a person who tested positive actually has the disease?

Use Bayes' Theorem to calculate this probability.

Hint

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