QUESTION: 761

An experiment involves selecting a random sample of 256 middle managers at random for study. One item of interest is their mean annual income. The sample mean is computed to be $35,420 and the sample standard deviation is $2,050. What is the point estimate?

$138.36
None of these answers
$2,050
$34,520
$35,420

Answer(s): E

Explanation:

The sample mean is a good estimate for the population mean.

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QUESTION: 762

Which of the following statements is false in reference to confidence intervals and/or tests of significance? Choose the best answer.

The three conventional level of confidence are 0.10, 0.05, and 0.01.
All else equal, the confidence interval for a 1% significance level is larger than the confidence interval for a 5% significance level.
The confidence level is typically equal to (1 - the probability of a Type II error).
The significance level is denoted by the Greek letter alpha.
The confidence level is equal to the significance level.
More than one of these answers is incorrect.

Answer(s): F

Explanation:

More than one of these answers is correct. First, the confidence level is not equal to the significance level.
Rather the confidence level is equal to (1 - the significance level). Remember that the significance level of a test is used to quantify the probability of a Type I error, which is defined as the act of incorrectly rejecting the null hypothesis. For example, a confidence level of 95% implies a 5% probability of incorrectly rejecting the null hypothesis (i.e. a Type I error). For example, a hypothesis test associated with a 0.01 significance level indicates a 0.99 level of confidence. The second incorrect statement in this example is that the confidence level of a hypothesis test is found by (1 - alpha), where "alpha" is equal to the probability of a Type I error.
Subtracting the probability of a Type II error from one will yield the power of the test. The remaining answers are all correct.

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QUESTION: 763

Which of the following are true regarding covariance?

Covariance of returns on two assets is 0 when the returns are unrelated.
II. Covariance will be negative if, when the return on one asset is below expected value, the other return will also be below its expected value.
III. The covariance of returns of an asset with itself is the asset's return variance.
IV. Covariance is the probability weighted average of the cross product of the deviation of each random variable from its expected value.
All but II.
All but I.
All but IV.
All but III.

Answer(s): A

Explanation:

I, III, and IV are all true. II is false. To make II true, we would have to restate it as "Covariance will be negative if, when the return on one asset is below expected value, the other return will be above its expected value."

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QUESTION: 764

The U.S. Federal Aviation Administration reported that passenger revenues on international flights increased from $528 million in 1972 to $5,100 million in 1995. What is the geometric mean annual percent increase in international passenger revenues?

None of these answers
27.9
9.96
103.6
10.4

Answer(s): E

Explanation:

There are 24 years involved. The geometric mean is = [(1 + 5100/528)^1/23]-1. In words, it is the 23rd square root of (1 + 5100/528) minus 1. So we have GM = (1 + 9.66)^(1/23) - 1 = 0.1036 = 10.4%

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QUESTION: 761

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QUESTION: 764

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