CFA Domain 2: Quantitative Methods (Quiz 2)

A fund has 200 bonds. Forty of them are investment grade; the remainder are high-yield bonds. The current manager has added 35% of the investment-grade bonds and 80% of the high-yield bonds to the fund. The probability that a randomly selected security is either an investment-grade bond or any bond that was not added by the current manager is closest to:

Which of the following is most likely a discrete random variable?

There is an 80% chance that a hedge fund's return will exceed its benchmark this year. There is a 90% chance that the fund manager will earn higher total compensation than last year if the fund's return exceeds the benchmark. Suppose that the overall probability that the manager will earn higher total compensation this year is 73%. Which of the following statements is most accurate?

An analyst takes a sample of 200 observations from a population of a stock's daily price changes. The population is normally distributed, and its variance is unknown. The sample has a mean of $1.16 and its variance is 0.8649. The degree of confidence that the population's mean price change falls between 1.1383 and 1.1817 is closest to:

An analyst performs hypothesis tests on 20 samples from a group of small-cap stocks but is concerned about the multiple testing problem. Five samples have a p-value below the significance level of 10%, ranging from 0.0351 to 0.0784. Based on this information, the most appropriate decision is to classify these five results as:

An analyst draws a large sample of data from a nonnormally distributed population. If the population variance is known, then the most appropriate type of statistic for calculating the reliability factor is the:

A nonparametric test can be most appropriately applied to which of the following?

An investment's return has a normal distribution with a mean of 13.6%. If the value of its cumulative distribution function (CDF) at 12.2% is 0.0808, then the value of its CDF at 15% is closest to:

A t-test is conducted to determine whether a population mean is significantly different from zero, using a sample mean of 0.3, a sample standard deviation of 1.1, and a sample size of 40. The test fails to reject the null hypothesis. This hypothesis test is most likely a:

Five annual deposits of £1 million each will be made to an account that earns 4% annually. If the first deposit is made today, then the value of the account at the end of five years will be closest to:

"The annual returns for a mutual fund over the past 12 years are shown in the table below: The 7th decile return for this fund is closest to:"

An investor holds two funds: Fund A and Fund B. The investor wants to forecast the probability that Fund A will outperform Fund B each year for the next two years. If each year's performance is independent, which probability rule should the analyst use?

An interest-bearing investment has a stated annual interest rate of 8% compounded quarterly. If ¥100 million is invested today, the value of the investment in one year is closest to:

An initial investment of $9,520 grows to $15,000 in five years with quarterly compounding. If there are no withdrawals or deposits during those five years, the investment's effective annual rate is closest to:

"An analyst runs a linear regression on crude oil prices (in USD per barrel) and a company's gross margin (in %), with the following results: The analyst forecasts an average oil price of USD 66 in the following quarter. Considering t-values of ±2.228, the 95% prediction interval for the company's gross margin is closest to:"

An analyst runs a linear regression between two variables but infers that they have a nonlinear relationship. Which of the following approaches would be most appropriate to address this issue?

If an analyst determines that an asset has a symmetrical return distribution with an excess kurtosis of −0.6, then the distribution's kurtosis is closest to:

A company has a 0.05 probability of exceeding its earnings per share (EPS) target for the current fiscal year. The odds against exceeding the EPS target are closest to:

"A and B are two events with the following probabilities: The joint probability of A and B is closest to:"

An analyst studies 10 years of historical data on stock splits for companies listed on the Toronto Stock Exchange (TSE) to determine the probability that a firm listed on the TSE will have a stock split this year. The probability derived from this method is best described as: