Question

An analyst believes the probability that U.S. stock returns exceed long-term corporate bond returns over a five-year period is based on personal assessment. This type of probability is best characterized as a(n) ___________.

Answer 1

Answer: Subjective Probability

Explanation: The analyst has based his/her prediction on personal assessment without carrying out calculations, and he/she may have made the prediction based on past experience.

Subjective Probability therefore is the probability made by an individual and that is based ob his/her personal sentiments about an issue, no calculations are carried out in this type of probability, and predictions are made on particular issues because they may look identical to issues that have happened in the past.