Chris Has Determined That the Probability of Earning a 95

question 50

Multiple Choice

Chris has determined that the probability of earning a 95 on the next economics test is 10%,the probability of earning an 85 is 40%,and the probability of earning a 75 is 50%.
Chris's expected score on this test can be determined by solving

• A)(.33)(95)+ (.33)(85)+ (.33)(75).
• B)(10)(95)+ (40)(80)+ (50)(70).
• C)(.1)(95)+ (.4)(85)+ (.5)(75).
• D)(95 + 85 + 75)/3.

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Definitions:

Risk Premium

The additional return over the risk-free rate that an investment is expected to yield, compensating investors for taking on higher risk.

Default Risk

The risk of loss arising from a debtor failing to make required payments on their debt obligation.

Cost Of Borrowing

The total expense that a borrower pays to secure and utilize a loan, including interest rates, fees, and other charges.

Revolving Loan

A loan that provides the borrower with the ability to draw down, repay, and re-borrow funds up to a designated amount over a given period.