Suppose a Theory Is Used to Make a Prediction

question 31

Multiple Choice

Suppose a theory is used to make a prediction. A measurement is carried out to test the prediction. The measurement is found to have a value far larger than the prediction. This means

• A) the theory must be completely incorrect and must be rejected entirely.
• B) nothing because theories are not facts; theories often make incorrect predictions but are still regarded as true by scientists.
• C) the measurement must be incorrect; theories by definition cannot be incorrect.
• D) the theory might have correct elements but must be modified to account for some unforeseen influences.

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Definitions:

Cash Flow Assessment

The analysis of a company's cash inflows and outflows to evaluate its financial health.

Credit Risk

The risk of loss due to a borrower's failure to make payments on any type of debt.

Investment Potential

This refers to the likelihood or capacity for an investment to grow in value, offering returns to the investor.

Discounted Present Value

Discounted present value is a financial calculation that determines the current worth of a future sum of money or stream of cash flows, given a specified rate of return.