1. What are the mean and standard deviation of a standard normal distribution?

Mean Standard deviation

????A 0 0

????B 0 1

????C 1 0

????D 1 1

????Answer: B. The standard normal distribution (unit normal distribution) has a mean of zero and a standard deviation deviation of one

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2. The population mean and standard deviation of monthly net sales for a company are $100 million and $30 million, respectively. if monthly net sales are normally distributed, which of the following best describes the interval that would be expected to contain approximately 95 percent of the monthly net sales?

????A. ＄10 million to ＄190 million.

????B. ＄30 million to ＄170 million.

????C. ＄40 million to ＄160 million.

????D. ＄70 million to ＄130 million.

Answer: C. In normal distribution, about 95 percent of the observations will fall within standard deviations of the mean ＄100-2*(30)=＄40and ＄100+2*(30)= ＄160

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3. A mutual fund manager wants to create a fund based on a high-grade corporate bond index. She first distinguishes between utility bonds and industrial bonds; she then for each segment defines maturity intervals of less than 5 years, 5 to 10 years, and greater than 10 years. For each segment and maturity level, she classifies the bonds as callable or non-callable. For the manager’s sample, which of the following best describes the

Sampling approach Number of sampling cells?

????A Simple random sample 3

????B Simple random sample 12

????C Stratified random sample 3

????D Stratified random sample 12

Answer: D.The mutual fund manager is using a stratified random sampling approach with 12 cells: 2*3*2=12 sampling cells

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4. A utility analyst performed a regression analysis relating monthly energy consumption to average monthly temperature over the last four years. Total variation of the dependent variable was 58.6 and the unexplained variation was 31.3. The coefficient of determination and standard error of the estimate, respectively, for the regression model are closest to

????Coefficient of determination Standard error of the estimate

????A 0.4659 0.8075

????B 0.4659 0.8249

????C 0.5341 0.8075

????D 0.5341 0.8249

Answer: B. The coefficient of determination is explained variation divided by total variation (58.6-31.3)/58.6=0.4659. There are a total of 48 observations in the sample the standard error of the estimate is(31.3/(48-2))1/2=0.8249

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5. A lognormal distribution differs from a normal distribution in that a lognormal distribution:

????A. is skewed to the left

????B. cannot contain negative values

????C. has less complicated confidence intervals

????D. is completely described by two parameters

Answer: B. The lognormal distribution is bounded on the left by zero, but a normal distribution contains negative values.