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Free CFA-Level-I Exam Braindumps (page: 243)

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You have invested in a stock with a expected return of 14% and a standard deviation of 7%. Your target rate of return is 7%. What is the probability that you will not meet your objective, assuming stock returns are normally distributed?

  1. 32%
  2. 34%
  3. 16%
  4. 68%

Answer(s): C

Explanation:

There is a 68% chance that the stock returns will be within one standard deviation of the mean i.e. with 68% chance, the stock returns will be between 7% and 21%. Hence, the probability that stock returnswill lie outside this range is 100% - 68% = 32%. Since the normal distribution is symmetrically distributed about the mean, the probability that the returns will be less than 7% equals 32/2 = 16% 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.



In a systematic random sampling method,

  1. a sample selected such that every member of the population has the same chance of being selected.
  2. a sample is selected by randomly from within the first N members of the population and then selecting every Nth member of the population.
  3. a sample is selected by drawing numbers from a normal probability distribution.
  4. a sample is selected by first dividing the population into groups and then selecting members from each group.

Answer(s): B

Explanation:

The population members are arranges in a systematic way, such as alphabetically or by date received. A random starting point is selected and then every Nth item is selected for inclusion in the random sample.



The mean, as a measure of central tendency would be inappropriate for which one of the following?

  1. Incomes of lawyers
  2. Number of pages in textbooks on statistics
  3. Ages of adults at a senior citizen center
  4. Marital status of college students at a particular university
  5. None of these answers

Answer(s): D

Explanation:

The answer to the question what is your marital status is usually yes or no, or some other status - divorced, widow etc. So we cannot take an average of non-ordinal observations.



Which is true of positively skewed distributions?

  1. They have a limited, but frequent, upside.
    II. Their downside is less frequent but more unlimited.
    III. They are attractive to investors because their mean is larger than their median.
  2. III
  3. I and II
  4. II
  5. I and III
  6. II and III

Answer(s): A

Explanation:

I and II are false. The correct statements for them would be: 1) positively skewed distributions have a limited, but frequent, downside, and 2) they have a less frequent, but more unlimited, upside. III is true.






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