Q1. Which of the following statements about the normal probability distribution is most accurate?
A) Sixty-eight percent of the area under the normal curve falls between 0 and +1 standard deviations above the mean.
B) The normal curve is asymmetrical about its mean.
C) Five percent of the normal curve probability falls more than outside two standard deviations from the mean.
Correct answer is C)
The normal curve is symmetrical with a mean of zero and a standard deviation of 1 with 34% of the area under the normal curve falling between 0 and +1 standard deviation above the mean. Ninety-five percent of the normal curve is within two standard deviations of the mean, so five percent of the normal curve falls outside two standard deviations from the mean.
Q2. Which of the following is least likely a probability distribution?
A) Zeta Corp.: P(dividend increases) = 0.60, P(dividend decreases) = 0.30.
B) Roll an irregular die: p(1) = p(2) = p(3) = p(4) = 0.2 and p(5) = p(6) = 0.1.
C) Flip a coin: P(H) = P(T) = 0.5.
Correct answer is A)
All the probabilities must be listed. In the case of Zeta Corp. the probabilities do not sum to one.
Q3. Which of the following statements about probability distributions is least accurate?
A) A binomial probability distribution is an example of a continuous probability distribution.
B) A discrete random variable is a variable that can assume only certain clearly separated values resulting from a count of some set of items.
C) The skewness of a normal distribution is zero.
Correct answer is A)
The binomial probability distribution is an example of a discrete probability distribution. There are only two possible outcomes of each trial and the outcomes are mutually exclusive. For example, in a coin toss the outcome is either heads or tails.
The other responses are both correct definitions.
Q4. Which of the following statements about probability distributions is least accurate?
A) A probability distribution is, by definition, normally distributed.
B) In a binomial distribution each observation has only two possible outcomes that are mutually exclusive.
C) A probability distribution includes a listing of all the possible outcomes of an experiment.
Correct answer is A)
Probabilities must be zero or positive, but a probability distribution is not necessarily normally distributed. Binomial distributions are either successes or failures.
Q5. A probability distribution is least likely to:
A) give the probability that the distribution is realistic.
B) contain all the possible outcomes.
C) have only non-negative probabilities.
Correct answer is A)
The probability distribution may or may not reflect reality. But the probability distribution must list all possible outcomes, and probabilities can only have non-negative values |