Which of the Following Probability Distributions Can Be Used to Describe

question 102

Multiple Choice

Which of the following probability distributions can be used to describe the distribution for a continuous random variable?

• A) Binomial distribution
• B) Normal distribution
• C) Poisson distribution
• D) Hypergeometric distribution
• E) Both Poisson distribution and Hypergeometric distribution

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Definitions:

SML Approach

Security Market Line approach; a graphical representation of the expected return of investments as a function of their systematic, non-diversifiable risk.

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its shareholders or debtholders.

Future Inflation

Anticipated increase in the price level of goods and services in the future, affecting purchasing power.

Market Risk Premium

The additional return an investor expects from holding a risky market portfolio instead of risk-free assets.