The closing price of a company's stock tomorrow can be lower, higher or the same as today's closing price. Without any prior information that may affect the price of the stock tomorrow, the probability that it will close higher than today's close is 1/3. This is an example of using which of the following probability approach?
A) a priori probability
B) empirical probability
C) subjective probability
D) conditional probability

Question

Quizplus · Accepted Answer

This is an example of using a priori probability, which is based on logical reasoning and deductive methods rather than empirical data or subjective judgment. The probability of the stock closing higher, lower or the same is assumed to be equally likely without any prior information that may affect the price, hence the probability of 1/3 for each outcome.

The Closing Price of a Company's Stock Tomorrow Can Be