Q4.6.2:

Consider each of the situations below. Describe which type of probability is represented by each situation, that is, empirical, subjective or a priori. When you have decided on each type, wed like you to write an answer that summarises the reasons for your decisions.

1. The probability that rates of return on the FTSE 100 are greater than the UK government 30-day Treasury bill for the period 1950 to 2018.
2. The probability of default on a corporate bond for a company that you have been analysing for the past twelve months.
3. The probability of an outcome where shareholders at a companys Annual General Meeting are voting about a forthcoming merger. Information is available on the way relative proportions of shareholders voted with respect to a previous similar merger announcement. There has been no change in the proportions of shareholders.