An Analyst Expects That 10% of All Publicly Traded Companies

question 109

Multiple Choice

An analyst expects that 10% of all publicly traded companies will experience a decline in earnings next year. The analyst has developed a ratio to help forecast this decline. If the company is headed for a decline, there is a 70% chance that this ratio will be negative. If the company is not headed for a decline, there is only a 20% chance that the ratio will be negative. The analyst randomly selects a company and its ratio is negative. Based on Bayes' theorem, the posterior probability that the company will experience a decline is ________.

• A) 3%.
• B) 7%.
• C) 18%.
• D) 28%.

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Definitions:

Bloom's Domains

The categorization of educational objectives by cognitive, affective, and psychomotor domains, as proposed by Benjamin Bloom, to guide instructional design and assessment.

Behaviourist Theory

A theory in psychology which states that all behaviors are learned through interaction with the environment, emphasizing external behaviors over internal thoughts.

Teaching Strategies

A range of methods or approaches used by educators to facilitate learning and improve student outcomes.

Incentive Spirometer

A medical device used to help patients improve the functioning of their lungs, encouraging them to take deep breaths by using visual feedback.