Investment Opportunities — Test

Question 21 • Advanced Financial Algebra

For a certain stock, P(increase)=(7)/(20) , P(decrease)=(11)/(20) , and P(no change)=(2)/(20) Which table represents the probability of each outcome?

Answer

Table with 2 columns and 4 rows.Row 1: Column 1, 'Outcome'; Column 2, 'P(Outcome)' Row 2: Column 1, 'increase'; Column 2, '0 point 1 4' Row 3: Column 1, 'decrease'; Column 2, '0 point 2 2' Row 4: Column 1, 'no change'; Column 2, '0 point 0 4'

Table with 2 columns and 4 rows.Row 1: Column 1, 'Outcome'; Column 2, 'P(Outcome)' Row 2: Column 1, 'increase'; Column 2, '0 point 4 0' Row 3: Column 1, 'decrease'; Column 2, '0 point 5 0' Row 4: Column 1, 'no change'; Column 2, '0'

Table with 2 columns and 4 rows.Row 1: Column 1, 'Outcome'; Column 2, 'P(Outcome)' Row 2: Column 1, 'increase'; Column 2, '0 point 0 7' Row 3: Column 1, 'decrease'; Column 2, '0 point 1 1' Row 4: Column 1, 'no change'; Column 2, '0 point 0 2'

Table with 2 columns and 4 rows.Row 1: Column 1, 'Outcome'; Column 2, 'P(Outcome)' Row 2: Column 1, 'increase'; Column 2, '0 point 3 5' Row 3: Column 1, 'decrease'; Column 2, '0 point 5 5' Row 4: Column 1, 'no change'; Column 2, '0 point 1 0'

Explanation

Convert each fraction to a decimal by dividing the numerator by 20: 7/20 = 0.35, 11/20 = 0.55, and 2/20 = 0.10. These match the table listing increase as 0.35, decrease as 0.55, and no change as 0.10, which is choice D.

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