An Analyst Expects That 20% of All Publicly Traded Companies

question 74

Multiple Choice

An analyst expects that 20% 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 90% chance that this ratio will be negative.If the company is not headed for a decline,there is only a 10% chance that the ratio will be negative.The analyst randomly selects a company with a negative ratio.Based on Bayes's theorem,the posterior probability that the company will experience a decline is

• A) 18%.
• B) 26%.
• C) 44%.
• D) 69%.

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Definitions:

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Restrictions or caps, often referring to the time within which legal action can be taken.

Accounting

The systematic process of recording, analyzing, and interpreting financial transactions and data.

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A means of legal reparation or correction, often through compensation or specific performance in law.

Contract Law

The body of law that governs the creation, enforcement, and termination of contracts between parties.