A probability distribution a. is a way of dealing with uncertainty. b. lists all

ID: 1206841 • Letter: A

Question

A probability distribution

a. is a way of dealing with uncertainty.

b. lists all possible outcomes and the corresponding probabilities of occurrence.

c. shows only the most likely outcome in an uncertain situation.

d. both a and b

e. both a and c

39 The variance of a probability distribution is used to measure risk because a higher variance is associated with

a. a wider spread of values around the mean.

b. a more compact distribution.

c. a lower expected value.

d. both a and b

e. all of the above

40 Risk exists when

a. all possible outcomes are known but probabilities can't be assigned to the outcomes.

b. all possible outcomes are known and probabilities can be assigned to each.

c. all possible outcomes are known but only objective probabilities can be assigned to each.

d. future events can influence the payoffs but the decision maker has some control over their probabilities.

e. c and d

41 In making decisions under risk

a. maximizing expected value is always the best rule.

b. mean variance analysis is always the best rule.

c. the coefficient of variation rule is always best.

d. maximizing expected value is most reliable for making repeated decisions with identical probabilities.

e. none of the above

38. d. both a and b

39 a wider spread of values around the mean.

40. e. c and d

41 d. maximizing expected value is most reliable for making repeated decisions with identical probabilities.

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