A Tree Diagram Is

question 8

Multiple Choice

A tree diagram is:

• A) similar to a Venn diagram and useful for visually depicting a data set.
• B) a useful tool for graphically depicting a sample space.
• C) vital for choosing the experimental outcome that is certain to occur in the next trial.
• D) the only way to determine accurate probability estimates.

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Definitions:

Option

A financial derivative that gives the holder the right, but not the obligation, to buy or sell an asset at a set price within a specific period.

Firm Completion

A commitment to finish a project or deliver a product by a specified date.

Asymmetric Information

Assumes managers have more complete information than investors about a firm’s prospects—can have an important effect on capital structure.

Diversified Portfolios

Investment strategies involving the mixing of various asset classes and securities to reduce risk through diversification.