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Free CFA-Level-I Exam Braindumps (page: 123)

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Type I error refers to the event that we will:

  1. Accept the alternative when it is true.
  2. none of these answers.
  3. Reject the null when it is true.
  4. Fail to reject the null when it is false.
  5. Reject the alternative when it is true.

Answer(s): C

Explanation:

Remember that the null hypothesis is the one that you maintain to be true unless there is sufficient evidence to prove otherwise. Therefore, the first type of mistake that can happen is that you reject the maintained hypothesis when in fact, it is true. This error is referred to as "Type I" error. On the other hand, you may not have sufficient evidence to disprove the null when in fact, it is false. This failure to appropriately reject the null is referred to as "Type II" error.



You are faced with a counting problem in which you must choose k objects from n total objects. The order of choosing does not matter. The counting method you should use is:

  1. None of these answers is correct.
  2. The binomial formula.
  3. The multinomial formula.
  4. The multiplication rule.

Answer(s): B

Explanation:

The combination, or binomial formula, gives the number of ways that k objects can be chosen from n items, without regard to the order of choosing. The formula is n_C_k = (n choose k) = n! / [k! *(n-k)!].



In a statistical regression estimation, the R-square is found to be 39% and the slope coefficient is -0.3. The percentage of variance of the dependent variable not explained equals ________.

  1. 0.30
  2. 0.61
  3. 0.09
  4. 0.39

Answer(s): B

Explanation:

The R-square of the regression measures the amount of variance of the dependent variable explained by the independent variable. This is given to be 39%. Hence, the amount not explained equals 100% - 39% = 61%.



A bell-shaped, symmetrical frequency distribution has a mean of 10. If 16% of the observations in the distribution are negative, what is the coefficient of variation of X?

  1. 1.0
  2. 0.32
  3. 10.0
  4. 0.1

Answer(s): A

Explanation:

The fraction of observations which are less than zero equals 16% i.e. the fraction of observations which are less than (mean - 10) equals 16% (given). Since the distribution is symmetrical about the mean, this implies that the fraction of observations which are more than (mean + 10) also equals 16%. Thus, the fraction of the observations lying between 0 and 20 equals 1-0.16-0.16 = 0.68. For a bellshaped, symmetrical frequency distribution, 68% of the observations lie within one standard deviation of the mean. Hence, the standard deviation of the distribution equals 10. The coefficient of variation is then equal to standard deviation/mean = 10/10 = 1.






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