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Free CFA-Level-I Exam Braindumps (page: 217)

Page 216 of 991
PDF with 3963 Questions

In the equation Y' - a + bX, what is Y'?

  1. Slop of the line
  2. Value of Y when X=0
  3. None of these answers
  4. Predicted value of Y, given a specific X value
  5. Y intercept

Answer(s): D

Explanation:

The regression is written as Y' = a + bX. The letter "a" is the Y intercept and b is the slope of the line. Y' is the predicted value of Y given a specific value of X.



What deposit would you need to make today in order to withdraw $100 a month for the next 5 years, beginning next month, if the deposit will accrue interest at 8% per year, compounded monthly?

  1. $5,141.23
  2. $492.59
  3. $1,237.66
  4. $399.27
  5. $4,931.84

Answer(s): E

Explanation:

On the BAII Plus, press 60 N, 8 divide 12 = I/Y, 100 PMT, 0 FV, CPT PV. On the HP12C, press 60 n, 8 ENTER 12 divide i, 100 PMT, 0 FV, PV. The answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.



If the 1% level of significance is used and the computed value of z is +6.00, what is our decision?

  1. Do not reject Ho
  2. None of these answers
  3. Reject Ho
  4. This cannot be answered

Answer(s): C

Explanation:

This falls beyond the critical value of 1.645. Therefore it falls in the rejection region.



A stock's return is normally distributed with a mean of 16% and a standard deviation of 8%. The probability that an investment in the stock will result in a loss in one year is approximately:

  1. 5%
  2. 2.5%
  3. cannot be calculated
  4. 10%

Answer(s): B

Explanation:

Note that the mean is 2 standard deviations above zero. The probability that the stock's return will lie outside the 2-sigma range around the mean equals 5% for a standard normal distribution. This implies that the stock return will be either less than 0% or more than 32% with a 5% probability. Since the normal distribution is symmetrical about the mean, the probability that the stock return will be less than zero equals 5/2 = 2.5%.
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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