QUESTION: 965

You have invested in a stock with a expected return of 14% and a standard deviation of 7%. Your target rate of return is 7%. What is the probability that you will not meet your objective, assuming stock returns are normally distributed?

Answer(s): C

Explanation:

There is a 68% chance that the stock returns will be within one standard deviation of the mean i.e. with 68% chance, the stock returns will be between 7% and 21%. Hence, the probability that stock returnswill lie outside this range is 100% - 68% = 32%. Since the normal distribution is symmetrically distributed about the mean, the probability that the returns will be less than 7% equals 32/2 = 16% Instead of the above, you could also solve the problem using the z-score and the normal probability distribution table. You should, however, be aware of short-cuts like the above.

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QUESTION: 966

In a systematic random sampling method,

a sample selected such that every member of the population has the same chance of being selected.
a sample is selected by randomly from within the first N members of the population and then selecting every Nth member of the population.
a sample is selected by drawing numbers from a normal probability distribution.
a sample is selected by first dividing the population into groups and then selecting members from each group.

Answer(s): B

Explanation:

The population members are arranges in a systematic way, such as alphabetically or by date received. A random starting point is selected and then every Nth item is selected for inclusion in the random sample.

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QUESTION: 967

The mean, as a measure of central tendency would be inappropriate for which one of the following?

Incomes of lawyers
Number of pages in textbooks on statistics
Ages of adults at a senior citizen center
Marital status of college students at a particular university
None of these answers

Answer(s): D

Explanation:

The answer to the question what is your marital status is usually yes or no, or some other status - divorced, widow etc. So we cannot take an average of non-ordinal observations.

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QUESTION: 968

Which is true of positively skewed distributions?

They have a limited, but frequent, upside.
II. Their downside is less frequent but more unlimited.
III. They are attractive to investors because their mean is larger than their median.
III
I and II
II
I and III
II and III

Answer(s): A

Explanation:

I and II are false. The correct statements for them would be: 1) positively skewed distributions have a limited, but frequent, downside, and 2) they have a less frequent, but more unlimited, upside. III is true.

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QUESTION: 965

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QUESTION: 966

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QUESTION: 967

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QUESTION: 968

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