CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

A fundamental analyst studying 100 potential companies for inclusion in her stock portfolio uses the following three screening criteria:

Screening Criterion | Number of Companies meeting the screen
Market-to-Book Ratio > 4 | 20
Current Ratio >2 | 40
Return on Equity >10% | 25

Assuming that the screening criteria are independent, the probability (in %) that a given company will meet all three screening criteria is closest to ______.
A. 2.0
B. 6.5
C. 8.5
Explanation: The joint probability of the three independent criteria is calculated as: 0.2 x 0.4 x 0.25 = 0.02 or 2% of the 100 companies.

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