AuthorTopic: 'innocent' stats questions
@2009-11-06 14:23:51
Pls do not look at your notes..

1) An analyst constructed the following hypothesis test:

H0: b = 0
H1: b > 0

The null hypothesis means that:

A. the dependent variable is sensitive to changes in the independent variable.
B. the independent variable is sensitive to changes in the dependent variable.
C. changes in the dependent variable do not explain changes in the independent variable.
D. changes in the independent variable do not explain changes in the dependent variable.

2) A common stock with a coefficient of variation of 0.50 has a(n):

A. variance equal to half the stock?s expected return.
B. expected return equal to half the stock?s variance.
C. expected return equal to half the stock?s standard deviation.
D. standard deviation equal to half the stock?s expected return.

3) An investment strategy has an expected return of 12 percent and a standard deviation of 10 percent. If investment returns are normally distributed, the probability of earning a
return less than 2 percent is closest to:
(after looking at the answer, I still do not understand:( )

A. 10%.
B. 16%.
C. 32%.
D. 34%.
cfajoker
@2009-11-08 16:09:42
#3 is B. You can do it the long way by using the z statistic... X-E/S=z stat -2-(12)/10=1

Look up the cumulative z stat and subtract by 1. Or just use the normal distribution and you can estimate that 67% of all values will fall betwwn one standard deviation from the mean (expected return) in this scenario. There are two tails so you have to take 1-.67 and divide by 2. Approximately 16%... I think this is right...

Please correct me if I'm wrong...
Yooo
@2009-11-10 15:13:05
1. me thinks (C)
2. me thinks (D).
3. B.
nandan4
@2009-11-11 01:25:18
i think the answer for 1 is d as its always the value of independent variable that is used to explain the value od dependent variable.
exemplaria
@2009-11-22 12:57:30
Question one doesn't make any sense. First, the hypothesis test has been set up incorrectly. If H1: b>0, then by definition H0:B <=0. Second, what is b? A hypothesis test can be used for many things besides dependent/independent variable testing (testing means, differences of means, variances, equality of variances, etc). IF b is a correlation, (in math correlation is generally "r") then b=0 means the independent variable explains no variation in the dependent variable (D)
Yooo
@2009-12-20 19:29:44
Oh, whoops, No. 1 is D. b is the y-intercept and/or the slope in the regression equation. Got my independent variable mixed up.

### CFA Discussion Topic: 'innocent' stats questions 