What is the difference between mutually exclusive events and independent events?
Independent events have no influence on one another. Therefore if we have two events A and B, the probability of both events occurring is the multiplication of their respective probabilities. Mutually exclusive events have elements that are not common to each other. Therefore the probability of the intersection of events A and B are zero.
What does the beta measure?
Beta measures the level of risk of a project or company relative to the market risk.
What factors determine whether or not we should invest in a project?
- The magnitude of the cash Flow - Time of the cash flow - The rate of return required on the cash flow