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Free CFA-Level-I Exam Braindumps (page: 238)

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PDF with 3963 Questions

William Henry, a quantitative analyst with Smith, Kleen & Beetchnutty Brokerage, is examining a data sample and has amassed the following information:
Standard deviation of the sample: 0.97
Number of observations: 109
Degrees of freedom: 2
Sample mean: 11.03
Assume that Mr. Henry formulates a null hypothesis that states that the value of the population mean is equal to zero. Additionally, assume that the population standard deviation is unknown. Given this information, what is the standard error of the estimate? Further, what is the test statistic? Choose the best answer.

  1. 0.0929; 10.90
  2. 0.0929; 118.73
  3. 0.0938; 117.59
  4. None of these answers is correct.
  5. 0.1858; 59.36
  6. 0.1858; 11.41
  7. 0.0938; 58.80

Answer(s): B

Explanation:

If the population standard deviation is unknown, as in this example, the standard error of the estimate is found by using the following equation:
{Standard error = s / square root of n} where s = the sample standard deviation and n = the number of observations in the sample.
In this example, all of the necessary information has been provided, and the determination of the standard error of the estimate is found as:
{Standard error = [0.97 / 10.44] = 0.0929}
Now that the standard error of the estimate has been calculated, the test statistic can be found by using the following equation:
{Test statistic = [sample statistic - value of the population parameter under the null hypothesis] / standard error of the sample statistic].
Again, all of the necessary information has been provided, and the calculation of the test statistic is found as follows:
{Test statistic = [11.03 - 0.00] / 0.0929 = 118.73}
This is a very large value for the test statistic. In this example, the null hypothesis would likely be rejected unless a very low confidence level is assumed.



If a frequency distribution has open-ended intervals at the extremes, which measure of central tendency is the most difficult to estimate?

  1. Mean
  2. None of these answers
  3. Median
  4. All of these answers
  5. Mode

Answer(s): A

Explanation:

This is so since in a frequency distribution we do not necessarily know what the extreme values are especially in an open ended class. Therefore, the mean, which is very sensitive to extreme values will be difficult to determine.



What is the following table called?

Number of Heads Probability of Outcome
01/8 = 0.125
13/8 = 0.375
23/8 = 0.375

31/8 = 0.125
Total 8/8 = 1.000

  1. Ogive
  2. Standard deviation
  3. Probability distribution
  4. None of these answers
  5. Frequency table

Answer(s): C

Explanation:

The table gives both the outcomes and probability of each outcome. Therefore it is a probability distribution table.



What is a disadvantage of the range as a measure of dispersion?

  1. It is not in the same units as the original data.
  2. It can be distorted by a large mean.
  3. It is based on only two observations.
  4. None of these answers
  5. It has no disadvantage.

Answer(s): C

Explanation:

The range uses only the highest and the lowest observations and ignores all the observations in the middle.
This may not be indicative of the dispersion if the two extreme observations are outliers.






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