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Free CFA-Level-I Exam Braindumps (page: 228)

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PDF with 3963 Questions

The mean amount spent by a family of four on food per month is $500 with a standard deviation of $75. Assuming that the food costs are normally distributed, what is the probability that a family spends less than $410 per month?

  1. 0.1151
  2. 0.0362
  3. None of these answers
  4. 0.2158
  5. 0.8750

Answer(s): A

Explanation:

z = (X - u)/sigma = (410 - 500)/75=-1.2. z = 1.2 is 0.3849. Since 410 is below the mean, 1.0 - 0.8849 = 0.1151.



The results of the regressions using 200 observation on a variable Y against X are as follows:

Coefficient Standard error
intercept 3.62.1
slope 8.11.3

R square = 49%

The regression equation can be expressed as:

  1. Y = 3.6 + 8.1 X + error
  2. X = 8.1 + 3.6 Y + error
  3. Y = 8.1 + 3.6 X + error
  4. X = 3.6 + 8.1 Y + error

Answer(s): A

Explanation:

Note that Y is regressed against X, implying that Y is the dependent (left-hand side) variable and X is the independent (right-hand side) variable. The intercept in a regression equals the constant term and the slope coefficient is the multiplier on the independent variable.



Suppose we set the criterion for the rejection of the null that is extremely lax, assuring us that the null will not be rejected. Then, which of the following is/are true?

  1. The probability of a Type I error is zero.
    II. The probability of Type II error is zero.
    III. The significance level of the test is 1.
  2. I & III
  3. II only
  4. II & III
  5. none of these answers
  6. I only

Answer(s): E

Explanation:

A Type I error refers to the event that we will reject the null when, in fact, it is true. If the criterion is so loose that you never reject the null, then the probability of type I error is zero. A Type II error refers to the event that we will fail to reject the null when, in fact, it is false. If you never reject the null, then the probability of type II error is clearly non-zero. Finally, the significance level is the same as the probability of making a Type I error.



A stock has the following returns over 3 years: -5%, +15%, -4%. The annual geometric rate of return over the three years is ________.

  1. 9.36%
  2. 1.60%
  3. 7.42%
  4. 0.15%
  5. -2.21%
  6. 4.64%
  7. 3.31%
  8. -1.34%

Answer(s): B

Explanation:

The annual geometric rate of return equals [(1-5%)(1+15%)(1-4%)]^(1/3) - 1 = (0.95 * 1.15 * .96)^0.33 - 1 = 0.016 = 1.60%






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