Explanation:
Marginal probabilities are the probabilities summed across rows or down columns. Since this question addresses probabilities of an economic outlook, the sum across the row "normal" is: $5% + 30% + 15% = 50%$.
(Book 2, Module 15.1, LO 15.b)
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Use the following information to answer the next two questions.
The following table indicates probabilities associated with equity market returns and the economic outlook.
| Economic outlook | Equity Market Return | |
|---|---|---|
| -20% | 6% | |
| Recession | 15% | 5% |
| Normal | 5% | 30% |
| Boom | 0% | 5% |
Given the information in the table, what is the marginal probability that the economic outlook is normal?
A
20%.
B
30%.
C
40%.
D
50%.
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