From a Portion of a Probability Distribution, You Read That

question 59

Multiple Choice

From a portion of a probability distribution, you read that P(demand = 1) is 0.05, P(demand = 2) is 0.15, and P(demand = 3) is .20. The cumulative probability for demand = 3 would be which of the following?

• A) 0.133
• B) 0.200
• C) 0.400
• D) 0.600
• E) Cannot be determined from the information given.

Understand the concept of the risk-free rate of return and its computation.

Analyze the factors influencing the value of options and bonds.

Grasp the valuation of firms’ assets and debts and the impact of risk-free interest rates on these valuations.

Understand the characteristics of different types of bonds and their options, including callable, puttable, and convertible bonds.

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Definitions:

Disinterested

Having no bias or partiality; impartial.

Deficit

A shortfall or deficiency, often referring to a lack in quantity or quality of a desired or required resource or attribute.

Conventional

Based on or in accordance with what is generally done or believed; traditional and lacking in spontaneity or individuality.

Acculturation

The degree to which people from a certain cultural group display the beliefs and practices of that group.