An Experiment Consists of Four Outcomes with PE1) = 0

question 82

Multiple Choice

An experiment consists of four outcomes with PE1) = 0.2, PE2) = 0.3, and PE3) = 0.4. The probability of outcome E4 is

• A) 0.500
• B) 0.024
• C) 0.100
• D) 0.900

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Definitions:

Firm-specific Risk

The type of risk that affects a particular company or industry, also known as unsystematic risk.

Diversified Away

The risk that can be reduced or eliminated in a portfolio through investments in a variety of assets, thus not tied to the performance of a single investment.

Market Risk

The risk of losses in positions arising from movements in market prices.

Firm-specific Risk

The portion of an asset's risk that is attributable to the company's individual factors, uncorrelated with general market movements.