Quiz 1 - ECON 133 Summer 2009 Quiz 1 : August 3 Name: &...

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Unformatted text preview: ECON 133 Summer 2009 Quiz 1 : August 3 Name: & & & & & & & & & & & & & & & SID: & & & & & & & & & & & & & & & Score: & & & & & & & & & & & & & & & 1. (2 points) Rule of 72& If your investment adviser provides you with an investment opportunity that doubles the initial investment in 3 years, what is the annual return implied by this opportunity? (Pick the closest one) (a) 7% (b) 72% (c) 24% (d) 12% ANS: (c) 2. (3 points) Distribution& 300 million Americans participate in a coin-tossing contest. On the ¡rst day of the competition, the President will ¢ip a coin. Everyone in America guesses the result of the ¢ipping. Whoever guesses the outcome incorrectly will have to pay $1 to the winning pool and exit the contest. The President will subsequently ¢ip the coin once every morning for the next 19 days. There are 286 people correctly predicting the outcome of the coin tossing at the end of the contest. They eventually share the $300 million winnings. Which one of the following is the LEAST correct statement? (This example is adapted from Warren Bu/et£s tribute to the famous value investor Benjamin Graham.) (a) These 286 people may be purely lucky because 300 ; 000 ; 000 & ( 1 2 ) 20 = 286 : (b) If 220 out of 286 winners turn out to be under 18, it is evidence that young people are more likely to guess the coin ¢ips correctly. (c) If 220 out of 286 winners have gone to high school, there might be something special with high school education on guessing coin ¢ips....
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This note was uploaded on 04/07/2010 for the course ECON 133 taught by Professor Chen during the Summer '09 term at University of California, Santa Cruz.

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Quiz 1 - ECON 133 Summer 2009 Quiz 1 : August 3 Name: &...

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