Questions: Classify the following statement as an example of classical probability, empirical probability, or subjective probability. Explain your reasoning. An analyst feels that a certain stock's probability of increasing in price over the next month is 0.78.

Solution Steps

To classify the given statement, we need to understand the definitions of classical, empirical, and subjective probability:

• Classical Probability: Based on the assumption that all outcomes are equally likely.
• Empirical Probability: Based on observed data or experiments.
• Subjective Probability: Based on personal judgment or opinion.

Given that the analyst's feeling about the stock's probability is based on personal judgment, it is an example of subjective probability.

To classify the given statement, we need to understand the definitions of classical, empirical, and subjective probability:

• Classical Probability: Based on the assumption that all outcomes are equally likely.
• Empirical Probability: Based on observed data or experiments.
• Subjective Probability: Based on personal judgment or opinion.

The statement mentions that an analyst feels that a certain stock's probability of increasing in price over the next month is \(0.78\). This probability is based on the analyst's personal judgment rather than on equally likely outcomes or observed data.

Since the probability is based on the analyst's personal judgment, it is an example of subjective probability.

Final Answer