Bayes' Theorem Shows How to Revise a Prior Probability to Obtain

question 68

True/False

Bayes' Theorem shows how to revise a prior probability to obtain a conditional or posterior probability when another event's occurrence is known.

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Definitions:

Average Investment

A metric used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.

Net Present Value Method

A method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Desired Rate of Return

The minimum expected yield by investors for their investment, reflecting the risk level and opportunity cost.

Initial Investment

The amount of money put into a project or investment at the beginning, before any returns are realized.