A Probability Forecast That Calls for a "40 Percent Chance

question 64

Multiple Choice

A probability forecast that calls for a "40 percent chance of rain" means that

• A) there is a 40 percent chance that it will not rain within the forecast area.
• B) there is a 40 percent chance that any random place in the forecast area will receive measurable rain.
• C) it will rain on 40 percent of the forecast area.
• D) it will rain during 40 percent of the time over the forecast area.

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Definitions:

Accounting Rate of Return

A financial metric used to assess the profitability of an investment, calculated as the average annual profit divided by the initial investment cost.

Incremental Revenue

Additional income generated from a new action or decision, beyond what would have been achieved without it.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Real-options Analysis

A financial modeling technique for valuing flexibility and decision-making in investment under uncertainty.