University of Central Florida (UCF) QMB3200 Quantitative Business Tools II Midterm Practice Exam

The subjective method of assigning probabilities relies heavily on personal judgment, intuition, and experience rather than on formal statistical calculations or objective data. This approach is particularly useful in situations where historical data may be unavailable, or the events being assessed are unique or rare, making it difficult to apply empirical methods.

For example, when estimating the probability of future events in fields like investment forecasting or risk assessment, analysts often use their knowledge and experience to make educated guesses about likely outcomes. This method acknowledges that human insight can play a critical role in decision-making processes, especially in complex environments where quantitative data may provide limited guidance.

In contrast, other methods such as the relative frequency method, classical method, and statistical method all rely on past data or established theoretical models to determine probabilities, making them more structured and less dependent on personal judgment.