Answer Review - Email About Question ID 94295 Z-Table Z-Table Alt T-Table F-Table 5 F-Table 2.5 Chi-Table Acronyms If a stock decreases in one

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Answer Review - Question 22 Email About Question ID#: 93870 Z-Table Z-Table Alt T-Table F-Table 5% F-Table 2.5% Chi-Table Acronyms From a sample of 41 monthly observations of the S&P Mid-Cap index, the mean monthly return is 1% and the sample variance is 36. For which of the following intervals can one be closest to 95% confident that the population mean is contained in that interval? A) 1.0% ± 6.0%. B) 1.0% ± 1.9%. C) 1.0% ± 1.6%. Your answer: B was correct! If the distribution of the population is nonnormal , but we don’t know the population variance, we can use the Student’s t-distribution to construct a confidence interval. The sample standard deviation is the square root of the variance, or 6%. Because there are 41 observations, the degrees of freedom are 40. From the Student’s t distribution, we can determine that the reliability factor for t 0.025 , is 2.021. Then the 95% confidence interval is 1.0% ± 2.021(6 / √41) or 1.0% ± 1.9%. Exam Review - Question 18
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Unformatted text preview: Email About Question ID#: 94295 Z-Table Z-Table Alt T-Table F-Table 5% F-Table 2.5% Chi-Table Acronyms If a stock decreases in one period and then increases by an equal dollar amount in the next period, will the respective arithmetic average of the continuously compounded and holding period rates of return be positive, negative, or zero? A) Zero; positive. B) Zero; zero. C) Positive; zero. Your answer: C was incorrect. The correct answer was A) Zero; positive. The holding period return will have an upward bias that will give a positive average. For example, a fall from 100 to 90 is 10%, and the rise from 90 to 100 is an increase of 11.1%. The continuously compounded return will have an arithmetic average of zero. Since we can sum continuously compounded rates for multiple periods, the continuously compounded rate for the two periods (0%), means the rates for the two periods must sum to zero, and their average must therefore be zero....
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This note was uploaded on 02/12/2012 for the course PHYSICS 321 taught by Professor M during the Spring '11 term at Jordan University of Science & Tech.

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