"Sampling error" refers to:
Answer(s): C
Sampling error is the difference between the population's actual parameter and the parameter estimate that results from analysis of the sample.
A perpetuity pays $1,000 a year. You have a discount rate of 10% per year. If you are indifferent between buying this perpetuity and a 7-year annuity, how much does the annuity pay per year?
Answer(s): A
The value of the perpetuity is 1,000/0.1 = $10,000. If the annuity pays $C per year, then its value is C/0.1*[1 - 1/ (1.1)^7] = 4.868C. For you to be indifferent between these two, the two values must be equal, giving C = 10,000/4.868 = $2,054.
What annual deposit would you need to make, beginning one year from today, into an account paying 11% per year, compounded annually, in order to have $1,000,000 in 30 years?
Answer(s): D
On the BAII Plus, press 30 N, 11 I/Y, 0 PV, 1000000 FV, CPT PMT. On the HP12C, press 30 n, 11 i, 0 PV, 1000000 FV, PMT. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.
The probability of getting a value less than 1.3 from a standard normal distribution equals ________.
The z-value of a selected observation, X, from a normal distribution with mean M and standard deviation S equals z = (X-M)/S. For a standard normal distribution, M = 0 and S = 1. Therefore, for X = 1.3, z = 1.3. Using the Normal probability tables, we get P(Y < 1.3) = 0.9032.
What is the present value of $50 per year for 10 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 6% per year, compounded annually.
Recognize that this question is an annuity due situation, since the first cash flow occurs immediately or at the beginning of each period. Annuities where the first payment occurs 1 period from today (or at the end of each period) are called "ordinary" annuities. This requires placing the calculator into "Begin" mode prior to solving the question. NOTE: Be sure to place the calculator OUT OF annuity due mode after this question before going on to subsequent questions, or you will get the wrong answers! On the BAII Plus, press 2nd BGN. If the display shows END, then press 2nd SET and then 2nd Quit. This will place the BAII Plus into annuity due mode (you can tell this because the BAII Plus will display BGN in small letters). Now press 10 N, 6 I/Y, 50 PMT, 0 FV, CPT PV. Place the calculator back into End mode (for ordinary annuities) by pressing 2nd BGN and then if the calculator is displaying BGN, press 2nd SET and 2nd Quit. The BGN letters should disappear from the display.On the HP12C, press BlueShift END, which is the blue function on the front of the 8 digit key. This places the HP12C into Begin mode (the HP12C shows the word BEGIN in the display when in this mode). Then press 10 n, 6 i, 50 PMT, 0 FV, PV. To place the HP12C back into ordinary annuity mode (or END mode), press BlueShift BEG (the blue function written on the front of the 7 digit key). Note that the answer is displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.
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