This is a very hard question in my opinion. Unfortunately, though Rishi hit on a lot of good points, that answer is not correct.
In your P(C1) and P(C2) calculations 60 is not actually the number of ways that AA can sit together. The formula 5!/2! tells us the number of unique ways we can arrange 5 elements if 2 of them are considered to be indistinguishable. In other words, A1,A2,B,C,D and A2,A1,B,C,D would be considered just 1 arrangement: AABCD. So, 60 is the total number of ways that we can arrange AABCD.
To find the true values of P(C1) and P(C2):
There are 4 ways in which AA can sit together: AAxxx, xAAxx, xxAAx, and xxxAA. In each case, the two As can sit A1,A2 or A2,A1 so there are 4*2 = 8 ways they can sit together.
In each of 8 seatings, the other three can be arranged in 3! = 6 ways, so P(C1) = P(C2) = 8*6 = 48.
You are right that we should subtract the overlap: the number of ways they can both sit together. However, there are also not 30 ways this can happen.
For both couples to sit together, C must be in seat 1, 3, or 5. If C is in 2 or 4, it's not possible.
In each of those three cases, AA and BB can fill the other 4 slots, from left to right, either as AABB or BBAA. So there are 2 options there. Within each option, AA can sit in 2 ways and BB can sit in two ways, so there are 2*2*2 = 8 ways for them to sit in each of the 3 locations for C. So, there are 3*8 = 24 ways for them to both sit together.
Then, since 48 + 48 - 24 = 72, there are 72 ways for them to sit together, and 48 ways for them not to. 48/120 = 2/5.
A totally different approach.
Case 1: C is in spot 1 or 5 (these situations are reflections of each other and therefore identical). Probability = 2/5. Put A1 in the spot next to C. So: C,A1,x,y,z.
If A2 goes in spot y, both couples will NOT be together, otherwise at least one will. So, P(not together) in Case 1 = 1/3.
Case 2: C is in spot 2 or 4 (these situations are reflections of each other and therefore identical). Probability = 2/5. Put A1 in the spot outside of C. So: A1,C,x,y,z.
Again, if A2 goes in spot y, both couples will NOT be together, otherwise at least one will. So, P(not together) in Case 2 = 1/3.
Case 3: C is in spot 3. Probability = 1/5. Put A1 in spot 2. So: x,A1,C,y,z.
Here, if A2 goes in spot y OR z, both couples will NOT be together, otherwise both will. So, P(not together) in Case 3 = 2/3.
Total P(not together) = 2/5 * 1/3 + 2/5 * 1/3 + 1/5 * 2/3 = 2/15 + 2/15 + 2/15 = 6/15 = 2/5.
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