CFA Practice Question

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CFA Practice Question

Classify each statement as an example of empirical probability, classical probability, or subjective probability.

I. The probability a randomly selected citizen will approve of the U.S. president is 0.75.
II. The probability a child will attend the same college as his father is 0.4.
Correct Answer: empirical, subjective

User Contributed Comments 14

User Comment
may2k what is real difference?
jamiejamie a priori; where prob is determined before hand. like, odds of head or tails (50/50) or a MC test with 4 answers (1/4) empirical; probability based on some kind of quantitative work, like, a voting poll, or trends like percipitation e.g. "may gets 50cm of rainfall on average, so..." subjective; assessment of probability without any data. An example of this would be someone who says "The Packers have a 60% chance of winning today" but don't really use data to determine that, it's just what they think.
stefdunk I got the answers wrong way around, I figured, approval of the presidency to be subjective, while the probability a child attends the same college to be empirical, it can be concluded from historical data
tssverma I agree with stefdunk. empirical => historical see notes. Which one is historical ? II
sunilcfa Yes i too think the 2nd one is empirical as data can be collected and analyzed... but 1 is empirical
Mattik I = empirical because it is the probability of a "randomly selected citizen" which means it has been determined empirically by sampling.

II = subjective because it is not explicitly empirical (you have no information to sugest an empirical analysis was done). Therefore, it is subjective.
Bibhu To add, the sample space in II is unknown. The child could be from one country or from any country. So statistical data can't be collected with the information provided. So its subjective.
viannie I agree with the fact that I = empirical & II = subjective as well ... reasoning already mentioned by most of you here. Thanks!
rsanfo "randomly select citizen" implies that empirical evidence was gathered. In II, there is no evidence that empirical evidence was gathered, so it is subjective.
NikolaZ Well, clearly, II can also be empirical. What if statistics were held on alumni who had children in various U.S. colleges for a period of 10 years?
bidisha thanks mattik
sharky7 And how must be the statement to be "classical probability"? Thks
sgossett86 thanks mattik
farhan92 this question was clearly pre-Trump era..
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