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Free CFA-Level-I Exam Braindumps (page: 259)

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What is the level of significance?

  1. None of these answers
  2. Probability of a Type II error
  3. Beta error
  4. Z-vale of 1.96
  5. Probability of a Type I error

Answer(s): E

Explanation:

The level of significance and the type I error are both the probability of rejecting the null hypothesis when it is actually true.



What can we say if the coefficient of determination is 0.94?

  1. Direction of relationship is positive
  2. 94% of total variation in one variable is explained by variation in another variable
  3. All of these answers are correct
  4. Strength of relationship is 0.94
  5. None of these answers is correct

Answer(s): B

Explanation:

We cannot tell anything about the direction of the relationship from the coefficient of determination or r- squared.



What is the Net Present Value of this series of annual cash flows using an interest rate of 15% per year: Year
0: <$25,000>, Year 1: $5,000, Year 2: $0, Year 3: $30,000? (Note that the <> are used to indicate a negative number).

  1. $14.37
  2. <$926.69>
  3. $258.11
  4. <$291.21>
  5. <$204.58>

Answer(s): B

Explanation:

On the BAII Plus, press CF 2nd CLRWork 25000 +/- ENTER DownArrow 5000 ENTER DownArrow DownArrow 0 ENTER DownArrow DownArrow 30000 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 15 ENTER DownArrow CPT. On the HP12C, press these keys: 25000 CHS BlueShift CFo 5000 BlueShift CFj 0 BlueShift CFj 30000 BlueShift CFj Then press 15 i, YellowShift NPV. The answer is negative, indicating that the PV of the cash flows to be received is less than the original cash outflow. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure the BAII Plus has the P/Y value set to 1.



A researcher has a sample of 600 observations from a population whose standard deviation is known to be 51.44. The mean of the sample is calculated to be 3.6. The null hypothesis is stated as Ho: mean > 8.4. The researcher should

  1. accept the null at 95% significance.
  2. reject the null at 99% significance.
  3. fail to reject the null at 95% significance.
  4. none of these answers.

Answer(s): B

Explanation:

To test the hypothesis, you need to calculate the largest z-statistic since the null hypothesis is unidirectional and to the right. This makes it the hardest to reject the null and you should always use the most stringent criterion for rejecting the null. After all, the null is the hypothesis maintained to be true by default and only a sufficient weight of evidence should be used to reject that view. The largest z-statistic calculated under the null hypothesis is equal to (3.6 - 8.4)/2.1 = -2.4. Now, the alternative hypothesis is H1: mean <= 8.4. Since the alternative is directional, we use a one-tailed test. For this, the critical value at 95% level is -1.645 and for 99%, it is -2.32. -2.32 is the value below which only 1% of the probability mass of the standard normal distribution lies. Similarly, only 5% of probability lies below -1.645). Since even the calculated z-statistic that is most favorable to the null lies in the rejection region, we can reject the null at the 99% level in a one-sided test.






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