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Free CFA-Level-I Exam Braindumps (page: 255)

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PDF with 3963 Questions

A financial economist runs the following regression: Demand for cars = alpha + beta*income level + error In this regression, the demand for cars is ________ variable and the income level is ________ variable.

  1. dependent; dependent.
  2. dependent; independent.
  3. independent; independent.
  4. independent; dependent.

Answer(s): B

Explanation:

The left-hand side variable is the dependent variable since its behavior in the equation is being explained by the right-hand side variable, which is the independent variable. Note, however, that this does not imply any kind of causal relationship in general.



What is the measure that indicates how precise a prediction of Y is based on X or, conversely, how inaccurate the prediction might be?

  1. Least squares principle
  2. Slope of the line
  3. None of these answers
  4. Y intercept
  5. Regression equation

Answer(s): C

Explanation:

This refers to the standard error of estimates.



You are examining a portfolio composed of 1/3 money-market investments, 1/3 bonds, and 1/3 stocks. Last year, the return on the money-market investments was 5%; the return on bonds was 15%, and the return on stocks was -2%. What is the portfolio's weighted-average return?

  1. 6.66%.
  2. 6.33%.
  3. 7.00%.
  4. 6.00%.

Answer(s): D

Explanation:

The portfolio weighted-average return is equal to the sum (as i goes from 1 to n) of w_i * X_i, where w_i is the percentage weight in the portfolio of the ith asset, and X_i is the investment return of the ith asset. Here, we get a weighted mean of 1/3 * 0.05 + 1/3 * 0.15 + 1/3 * -0.02 = 6.00%. Note that because of the equal weighting, this is the same as the arithmetic return: (5% + 15% - 2%) / 3 = 18% / 3 = 6%.



Which of the following is true in a normal distribution?

  1. None of the answers
  2. All of these answers are correct
  3. Mean divides the distribution into two equal parts
  4. Mean equals the mode and the median
  5. Mode equals the median

Answer(s): B

Explanation:

All the above holds for a normal distribution.






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