- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 8. Probability Concepts
- Subject 1. Introduction

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**CFA Practice Question**

Out of the last 154 times that interest rates have been cut, the stock price of Company XYZ dropped 72 times. The probability that company XYZ's stock drops at the next rate cut is an example of what type of probability?

A. relative frequency or empirical

B. classical or a priori

C. subjective

**Explanation:**The correct answer is relative frequency or empirical since the probability of an event happening in the future is found by determining what fraction of the time the event occurred in the past.

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**User Contributed Comments**
2

User |
Comment |
---|---|

sbajaj |
Why is it not classical or a priori? |

wundac |
This is based on historical date and not judgement |