Reading 8: Probability Concepts-LOS i 习题精选

Session 2: Quantitative Methods: Basic Concepts
Reading 8: Probability Concepts

LOS i: Explain the use of conditional expectation in investment applications.

An analyst announces that an increase in the discount rate next quarter will double her earnings forecast for a firm. This is an example of a:

A)	conditional expectation.

B)	use of Bayes' formula.

C)	joint probability.

This is a conditional expectation. The analyst indicates how an expected value will change given another event.

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发表于 2011-3-1 15:25 | 只看该作者

A conditional expectation involves:

A)	refining a forecast because of the occurrence of some other event.

B)	calculating the conditional variance.

C)	determining the expected joint probability.

Conditional expected values are contingent upon the occurrence of some other event. The expectation changes as new information is revealed.