When Dealing with the Number of Occurrences of an Event

question 7

Multiple Choice

When dealing with the number of occurrences of an event over a specified interval of time or space, the appropriate probability distribution is a

• A)binomial distribution
• B)Poisson distribution
• C)normal distribution
• D)hypergeometric probability distribution

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Definitions:

Risk Aversion

A preference to minimize uncertainty and avoid risk in investment decisions.

Systematic Risk

The inherent risk that affects the entire market or a wide range of securities, often caused by factors like economic, political, or global events, and cannot be mitigated just by diversification.

Beta

Beta is a measure of a stock's volatility in relation to the overall market, indicating the stock's risk compared to that of the market.

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted according to its total market value.