Probability assessments may be base

Probability assessments may be based on past observations or historical data if thetrends that were characteristic of the past are expected to prevail in the future. Forecast-ing weather or predicting the outcome of a game in many professional sports is done onthe basis of compiled statistical data. Any probability assessments based on objectivedata are called objective probabilities. However, in many real in vestment situations, noobjective data are available to consider. In these situations, we assign subjective proba-bilities that we think are appropriate to the possible states of nature. As long as we actconsiste mly with our beliefs about the possible eve nts, we may reas on ably account forthe economic consequences of those events in our profitability analysis