Explanation:
The unconditional probability is the overall probability of an event occurring, disregarding any other conditions (like exchange rate changes). The total sum of all probabilities must equal $100%$.
Since the total probability of the investment underperforming is given as $55%100`% - 55% = 45%$
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Q.47 You have been given the following incomplete probability matrix about the return (in foreign currency terms) on an investment made in a foreign country as compared to the benchmark and the expected change in the exchange rate of the local currency against the foreign currency:
| Outperform | Underperform | |
|---|---|---|
| Appreciation | 10% | 15% |
| No change | 20% | |
| Depreciation | 25% | |
| Total | 55% |
What is the unconditional probability that the investment will outperform the market?
A
45%
B
40%
C
55%
D
50%
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