Refer to the Table Which Summarizes the Results of Testing

question 185

Multiple Choice

Refer to the table which summarizes the results of testing for a certain disease. $$\begin{array} { l c c } & \begin{array} { c } \text { Positive Test } \\\text { Result }\end{array} & \begin{array} { c } \text { Negative Test } \\\text { Result }\end{array} \\\text { Subject has the disease } & 87 & 9 \\\text { Subject does not have the disease } & 27 & 312\end{array}$$ A test subject is randomly selected and tested for the disease. What is the probability the subject has the disease given that the test result is negative?

• A) 0.094
• B) 0.972
• C) 0.028
• D) 0.221

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Definitions:

SML

The Security Market Line, a graphical representation of the Capital Asset Pricing Model that plots the expected return of the market at varying levels of systematic or market risk.

Beta

A metric that compares the level of risk and volatility of an individual security or portfolio to that of the general market.

SML

The Security Market Line, a graphical representation of the Capital Asset Pricing Model (CAPM) that displays the expected return of an investment as a function of its systemic risk.

Required Rate Of Return

The minimum percentage return an investor expects to receive from an investment, taking into account its risk.