Reading 8: Probability Concepts

LOS a: Define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events.

1、For a stock, which of the following is NOT a random variable?

A)   Its most recent closing price.

B)   Its P/E ratio.

C)   Its current ratio.

D)   Its stock symbol.

The correct answer was D)

A random variable must be a number. Sometimes there is an obvious method for assigning a number, such as when the random variable is a number itself, like a P/E ratio. A stock symbol of a randomly selected stock could have a number assigned to it like the number of letters in the symbol. The symbol itself cannot be a random variable.