Quants Test - TE 2

Which of the following most accurately describes how to standardize a random variable X?

• A. Subtract the mean of X from X, and then divide that result by the standard deviation of the standard normal distribution.
• B. Divide X by the difference between the standard deviation of X and the standard deviation of the standard normal distribution.
• C. Subtract the mean of X from X, and then divide that result by the standard deviation of X.

Which of the following statements is correct with respect to the null hypothesis?

• A. It is considered to be true unless the sample provides evidence showing it is false.
• B. It can be stated as “not equal to” provided the alternative hypothesis is stated as “equal to.”
• C. In a two-tailed test, it is rejected when evidence supports equality between the hypothesized value and population parameter.

Compared with historical simulation, Monte Carlo simulation is most appropriate when:

• A. probability distributions are unavailable.
• B. “what if” analysis is required.
• C. analytical methods are required.

Which of the following should be used to test the difference between the variances of two normally distributed populations?

• A. t-test
• B. F-test
• C. Paired comparisons test

The level of significance of a hypothesis test is best used to:

• A. calculate the test statistic.
• B. define the test’s rejection points.
• C. specify the probability of a Type II error.

• A. −2.009 and 2.009.
• B. −2.010 and 2.010.
• C. −1.960 and 1.960.

Which of the following is best described as a discrete random variable?

• A. The expected percentage change in a country’s gross national product for the next year
• B. The number of days on which the DJIA experienced an increase since 2013
• C. The expected annual return on the Nikkei 225 Index over the next year

A perpetual preferred stock makes its first quarterly dividend payment of $2.00 in five quarters. If the required annual rate of return is 6% compounded quarterly, the stock’s present value is closest to:

• A. $31.
• B. $126.
• C. $133.

• A. 63.3%.
• B. 91.2%.
• C. 96.8%.

If the probability that Zolaf Company sales exceed last year’s sales is 0.167, the odds for exceeding sales are closest to:

• A. 1 to 5.
• B. 1 to 6.
• C. 5 to 1.