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Free CFA-Level-I Exam Braindumps (page: 297)

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The z-value of a selected observation, X, from a normal distribution, also known as the normal deviate or the z- score of X, represents:

  1. the probability that another observation from the distribution will be less than or equal to X.
  2. the probability that another observation from the distribution will be more than or equal to X.
  3. the distance of X from the mean, in terms of standard deviation.
  4. the distance of X from zero.

Answer(s): C

Explanation:

The z-value of a selected observation, X, from a normal distribution with mean M and standard deviation S equals z = (X-M)/S. The z-value thus represents the distance of X from the mean, in terms ofstandard deviation. Note that the z-value is a distance measure. It does not measure probabilities directly.



How much will $1,250 become after 7 years at 10% per year, compounded annually?

  1. $2,298.66
  2. $1,324.77
  3. $2,435.90
  4. $2,500.00
  5. $2,388.14

Answer(s): C

Explanation:

On the BAII Plus, press 7 N, 10 I/Y, 1250 PV, 0 PMT, CPT FV. On the HP12C, press 7 n, 10 i, 1250 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.



Melinda May, a quantitative analyst with Smith, Kleen, & Beetchnutty Brokerage, has been instructed to perform a statistical analysis to test whether the earnings of biotechnology companies are negatively related to the growth of generic drug consumption. Ms. May begins her analysis by formulating and stating a hypothesis. Next, Melinda proceeds with an identification of the appropriate test statistic and its probability distribution. Now that the first two steps in the hypothesis testing process have been completed, Ms. May should proceed with which of the following? Choose the best answer.

  1. Evaluating the goodness of fit
  2. None of these answers is correct
  3. Specifying the significance level
  4. Stating the decision rule
  5. Collecting the data and performing the calculations
  6. Determining the p-value

Answer(s): C

Explanation:

Hypothesis testing involves a series of seven explicit steps:
Step 1: Formulating and stating the hypothesis
Step 2: Identifying the appropriate test statistic and its probability distribution Step 3: Specifying the significance level
Step 4: Stating the decision rule
Step 5: Collecting the data and performing the necessary calculations Step 6: Making the statistical decision
Step 7: Making the economic/investment decision.
In this example, Melinda May, a quantitative analyst, has begun her analysis by completing the first two steps in the hypothesis testing process. Now that the hypothesis has been stated and the appropriate test statistic has been calculated, Ms. May should proceed with a determination of the significance level, which is denoted by the Greek letter alpha. Remember that the significance level is equal to the probability of a Type I error, which is defined as incorrectly rejecting the null hypothesis. Subtracting the significance level from the number one will yield the confidence interval.



A stockbroker placed the following order:
50 shares of Kaiser Aluminum preferred at $104 a share
100 shares of GTE preferred at $25 1/4 a share
20 shares of Boston Edison preferred at $9 1/8 a share
What is the weighted mean price per share?

  1. $79.75
  2. $25.25
  3. $103.5
  4. None of these answers
  5. $42.75

Answer(s): D

Explanation:

(50*104)+(100*25.25)+(20*9.125) = 7907.5. Weighted mean is 7907.5/170 = 46.51






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