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    a) What is the value of the missing probability?

    b) What is the probability of a positive rate rise?

    c) Which of the four announcements is most likely?

    d) What is the expected value for this distribution?

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    Solution Preview

    a) What is the value of the missing probability?

    When you add up all of the probabilities, you have to get 1. If you add up the three possibilities we have, you get:

    0.10 + 0.35 + 0.10 = 0.55

    To get 1, the missing probability must be 1 - 0.55 = 0.45. That means that the probability of no change in the interest rate is 45%.

    b) ...

    Solution Summary

    The expert examines business analyst estimating the probabilities for a change.