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10. In analyzing a company, Analyst Sam prepared a probability matrix which is a joint (aka, bivariate) probability mass function that characterizes two discrete variables,
10. In analyzing a company, Analyst Sam prepared a probability matrix which is a joint (aka, bivariate) probability mass function that characterizes two discrete variables, equity performance versus a benchmark (over or under) and bond rating change. The company's equity performance will result in one of three mutually exclusive outcomes: under- perform, track the benchmark, or over-perform. The company's bond will either be upgraded, downgraded, or remain unchanged. Unfortunately, before Sam could share his probability matrix, he spilled coffee on it, and unfortunately some cells are not visible. Equity Performance Under- Track Over Perform BenchM Perform Upgrade 0.08 0.11 Bond No Change 0.15 0.30 Downgrade 0.06 13% 25.0% 32.0% 100% Two questions: what is the joint Prob (equity over-performs, bond has no change); and are the two discrete variables independent? A. 7.0%, yes B. 12.0%, yes C. 19.0%, no D. 22.0%, no
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