End of Chapter Questions - Statistics

Practice Questions & Solutions | Statistics 1
Review Questions
1. Your boss has asked you to analyze your firm’s marketing expenditures over the
past 40 quarters. Which of the following would you use to calculate measures of
location and variability for your firm’s historical marketing expenditures?
A. Hypothesis testing
B. Correlation analysis
C. Descriptive statistics
D. Distributional analysis
2. Which of the following is a statistical measure of location or centrality?

A. Mode
B. Variance
C. Standard Deviation
D. None of the above
3. Each of the following is a statistical measure of variability except:

A. range.
B. variance.
C. standard deviation.
D. correlation coefficient.
4. The statistical graph showing the proportion of observations appearing in each

category is a(n):
A. histogram.
B. scatter plot.
C. frequency distribution.
D. expected value distribution.
5. The statistic that involves summing the observation values and dividing by the
number of observations is the:
A. mean.
B. mode.
C. median.
D. standard deviation.
6. What is the median of the following annual values for revenue?

 $30
 $25
 $55
A. $25.00
B. $30.00
C. $36.67
D. $110.00
7. Use the following information to calculate the expected value of Firm X’s short-
term interest rate in the upcoming year.
Scenario Probability Short-Term Interest

Rates
Low rate environment 30% 4%
High-rate environment 70% 8%
A. 5.0%
B. 6.0%
C. 6.8%
D. 12.0%
8. An analyst believes that the revenue growth rate for the upcoming year is equally
probable to be either 3% or 6%. Based on this information, what is the expected
value for the revenue growth rate?
A. 3.0%
B. 4.5%
C. 6.0%
D. Cannot be determined from this information
9. The statistical measure of variability that is most significantly influenced by outliers

is:
A. range.
B. variance.
10. Which of the following values for the standard deviation indicates the least
variability?
A. 3%
B. 5%
C. 10%
D. 15%
11. What is the standard deviation for the following annual values for revenue? Assume
a population.
 $30
 $25
 $55
A. $13.12
B. $16.07
C. $30.00
D. $45.57
12. According to the Empirical Rule, roughly 67% of the observation values fall within
how many standard deviations from the mean?
A. 0
B. 1
C. 2
D. 3
13. Your boss has asked you to statistically analyze your firm’s earnings per share over
the past 10 years. Your firm has been incorporated for 50 years. Based on this
information, the 10 year period refers to a:
A. sample.
B. population.
C. semi-population.
D. binomial distribution.
14. You have collected historical data to determine whether the current inflation rate is
significantly higher than the average inflation rate over the past 30 years. Which of
the following states the null hypothesis for this situation?
A. The current inflation rate equals the average inflation rate

B. The current inflation rate is less than the average inflation rate
C. The current inflation rate is greater than the average inflation rate
D. The average inflation rate is greater than the current inflation rate
15. The distribution that should be used to statistically analyze the earnings per share
reported by firms incorporated on the Dow Jones Industrial Average over the past
50 years is the:
A. normal distribution.
B. Poisson distribution.
C. uniform distribution.
16. Which of the following values for the correlation coefficient indicates the strongest
association between two variables?
A. -0.95
B. 0.30
C. 0.75
D. 1.25
17. Which of the following statements is incorrect regarding the correlation coefficient?
A. The correlation coefficient cannot fall below -1.00

B. Before estimating the correlation coefficient, the analyst must identify the
dependent and independent variable
C. As the correlation coefficient becomes closer to 0.00, the analyst would feel more
confident concluding that the variables are uncorrelated
D. All of the above are true
18. In a regression model, the predictor variable is referred to as the:

A. intercept.
B. beta coefficient.
C. dependent variable.
D. independent variable.
19. With respect to the following generic regression model y = mx + b, the variable y
refers to the:
A. intercept.
20. A consultant has used 10 years of data to estimate a regression model that predicts
your firm’s annual revenues based on its marketing expenditures in that year. The
estimated regression model is: Revenues = $10 + $2.50*Marketing Expenditures. If
marketing expenditures in the upcoming year are expected to equal $100, then what
are the predicted revenues?
A. $2.50
B. $10.00
C. $250.00
D. $260.00
21. In a regression model, the difference between an actual value for the dependent
variable and the predicted value for the dependent variable is referred to as the:
A. range.
B. intercept.
C. prediction error.
22. Which of the following values for R-Square indicates the weakest degree of
explanatory power for a regression model?
A. -0.25
B. 0.30
C. 0.75
D. 1.25
23. In a regression model, which of the following shows whether the relationship
between a dependent and independent variable is statistically significant?
A. R-Square
B. T-statistic
C. Standard error
D. Standard deviation
24. It is impossible to include more than one independent variable in a regression

model. True or false?
25. In a regression model, which of the following is the percentage of variation in a

dependent variable that is explained by an independent variable?
A. R-Square
B. Multiple R
C. Standard error
D. Mean absolute deviation
Answers to Review Questions
1. Your boss has asked you to analyze your firm’s marketing expenditures over the
past 40 quarters. Which of the following would you use to calculate measures of
location and variability for your firm’s historical marketing expenditures?
A. Hypothesis testing
B. Correlation analysis
C. Descriptive statistics
D. Distributional analysis
Answer: C
Book reference: p.115
Slide deck: Chapter 3 – Statistics, Slide #3
Comment: Understand basic descriptive statistic concepts.
2. Which of the following is a statistical measure of location or centrality?

A. Mode
B. Variance
C. Standard Deviation
D. None of the above
Answer: A
Book reference: p.115-129
3. Each of the following is a statistical measure of variability except:

A. range.
B. variance.
Answer: D
4. The statistical graph showing the proportion of observations appearing in each

category is a(n):
A. histogram.
B. scatter plot.
C. frequency distribution.
D. expected value distribution.
Answer: C
5. The statistic that involves summing the observation values and dividing by the
number of observations is the:
A. mean.
B. mode.
C. median.
Answer: A
6. What is the median of the following annual values for revenue?

 $30
 $25
 $55
A. $25.00
B. $30.00
C. $36.67
D. $110.00
Answer: B
Sort and find the mid-point value: $25, $30, and $55
Comment: Calculate basic descriptive statistics.
7. Use the following information to calculate the expected value of Firm X’s short-
term interest rate in the upcoming year.
Scenario Probability Short-Term Interest

Rates
Low rate environment 30% 4%
High-rate environment 70% 8%
A. 5.0%
B. 6.0%
C. 6.8%
D. 12.0%
Answer: C
(0.30*0.04) + (0.70*0.08)
Slide deck: Chapter 3 – Statistics, Slide #12-13
Comment: Calculate expected value.
8. An analyst believes that the revenue growth rate for the upcoming year is equally
probable to be either 3% or 6%. Based on this information, what is the expected
value for the revenue growth rate?
A. 3.0%
B. 4.5%
C. 6.0%
D. Cannot be determined from this information
Answer: B
Equally probable implies a 50% probability (i.e., 1 / 2 for each scenario)
(0.50*0.03) + (0.50*0.06)
Comment: Calculate expected value.
9. The statistical measure of variability that is most significantly influenced by outliers

is:
A. range.
B. variance.
Answer: A
10. Which of the following values for the standard deviation indicates the least
variability?
A. 3%
B. 5%
C. 10%
D. 15%
Answer: A
11. What is the standard deviation for the following annual values for revenue? Assume
a population.
 $30
 $25
 $55
A. $13.12
B. $16.07
C. $30.00
D. $45.57
Answer: A
Comment: Calculate basic descriptive statistics. Use Excel.
12. According to the Empirical Rule, roughly 67% of the observation values fall within
how many standard deviations from the mean?
A. 0
B. 1
C. 2
D. 3
Answer: B
13. Your boss has asked you to statistically analyze your firm’s earnings per share over
the past 10 years. Your firm has been incorporated for 50 years. Based on this
information, the 10 year period refers to a:
A. sample.
B. population.
C. semi-population.
Answer: A
Comment: Understand sampling and hypothesis testing.
14. You have collected historical data to determine whether the current inflation rate is
significantly higher than the average inflation rate over the past 30 years. Which of
the following states the null hypothesis for this situation?
A. The current inflation rate equals the average inflation rate

B. The current inflation rate is less than the average inflation rate
C. The current inflation rate is greater than the average inflation rate
D. The average inflation rate is greater than the current inflation rate
Answer: A
Book reference: p. 178-192
15. The distribution that should be used to statistically analyze the earnings per share
reported by firms incorporated on the Dow Jones Industrial Average over the past
50 years is the:
A. normal distribution.
B. Poisson distribution.
C. uniform distribution.
Answer: A
16. Which of the following values for the correlation coefficient indicates the strongest
association between two variables?
A. -0.95
B. 0.30
C. 0.75
D. 1.25
Answer: A
Comment: Understand basic concepts related to correlation and regression.
17. Which of the following statements is incorrect regarding the correlation coefficient?
A. The correlation coefficient cannot fall below -1.00

B. Before estimating the correlation coefficient, the analyst must identify the
dependent and independent variable
C. As the correlation coefficient becomes closer to 0.00, the analyst would feel more
confident concluding that the variables are uncorrelated
D. All of the above are true
Answer: B
18. In a regression model, the predictor variable is referred to as the:

A. intercept.
Answer: D
19. With respect to the following generic regression model y = mx + b, the variable y
refers to the:
A. intercept.
Answer: C
20. A consultant has used 10 years of data to estimate a regression model that predicts
your firm’s annual revenues based on its marketing expenditures in that year. The
estimated regression model is: Revenues = $10 + $2.50*Marketing Expenditures. If
marketing expenditures in the upcoming year are expected to equal $100, then what
are the predicted revenues?
A. $2.50
B. $10.00
C. $250.00
D. $260.00
Answer: D
Predicted Revenues = $10 + ($2.50*$100) = $260
21. In a regression model, the difference between an actual value for the dependent
variable and the predicted value for the dependent variable is referred to as the:
A. range.
B. intercept.
C. prediction error.
Answer: C
22. Which of the following values for R-Square indicates the weakest degree of
explanatory power for a regression model?
A. -0.25
B. 0.30
C. 0.75
D. 1.25
Answer: B
23. In a regression model, which of the following shows whether the relationship
between a dependent and independent variable is statistically significant?
A. R-Square
B. T-statistic
C. Standard error
D. Standard deviation
Answer: B
24. It is impossible to include more than one independent variable in a regression

model. True or false?
Answer: False
25. In a regression model, which of the following is the percentage of variation in a

dependent variable that is explained by an independent variable?
A. R-Square
B. Multiple R
C. Standard error
D. Mean absolute deviation
Answer: A

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End of Chapter Questions - Statistics

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Practice Questions & Solutions | Statistics 1

2. Which of the following is a statistical measure of location or centrality?

3. Each of the following is a statistical measure of variability except:

4. The statistical graph showing the proportion of observations appearing in each

6. What is the median of the following annual values for revenue?

Scenario Probability Short-Term Interest

Low rate environment 30% 4%

High-rate environment 70% 8%

9. The statistical measure of variability that is most significantly influenced by outliers

A. The current inflation rate equals the average inflation rate

A. The correlation coefficient cannot fall below -1.00

18. In a regression model, the predictor variable is referred to as the:

24. It is impossible to include more than one independent variable in a regression

25. In a regression model, which of the following is the percentage of variation in a

Answers to Review Questions

2. Which of the following is a statistical measure of location or centrality?

3. Each of the following is a statistical measure of variability except:

4. The statistical graph showing the proportion of observations appearing in each

6. What is the median of the following annual values for revenue?

Scenario Probability Short-Term Interest

Low rate environment 30% 4%

High-rate environment 70% 8%

9. The statistical measure of variability that is most significantly influenced by outliers

A. The current inflation rate equals the average inflation rate

A. The correlation coefficient cannot fall below -1.00

18. In a regression model, the predictor variable is referred to as the:

24. It is impossible to include more than one independent variable in a regression

25. In a regression model, which of the following is the percentage of variation in a

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