A mutual fund guide ranked 18 bond mutual funds by total returns for the year 2014. The guide also assigned each fund one of five risk labels: high risk (four funds), above-average risk (four funds), average risk (three funds), below-average risk (four funds), and low risk (three funds); as 4 + 4 + 3 + 4 + 3 = 18, all the funds are accounted for. How many different ways can we take 18 mutual funds and label 4 of them high risk, 4 above-average risk, 3 average risk, 4 below-average risk, and 3 low risk, so that each fund is labeled?
The answer is close to 13 billion. We can label any of 18 funds high risk (the first slot), then any of 17 remaining funds, then any of 16 remaining funds, then any of 15 remaining funds (now we have 4 funds in the high risk group); then we can label any of 14 remaining funds above-average risk, then any of 13 remaining funds, and so forth. There are 18! possible sequences. However, order of assignment within a category does not matter. For example, whether a fund occupies the first or third slot of the four funds labeled high risk, the fund has the same label (high risk). Thus there are 4! ways to assign a given group of four funds to the four high risk slots. Making the same argument for the other categories, in total there are (4!)(4!)(3!)(4!)(3!) equivalent sequences. To eliminate such redundancies from the 18! total, we divide 18! by (4!)(4!)(3!)(4!)(3!). We have 18!/(4!)(4!)(3!)(4!)(3!) = 18!/(24)(24)(6)(24)(6) = 12,864,852,000. This procedure generalizes as follows.