Reading 7: Statistical Concepts and Market Returns-LOS e习题 2010, including, interpret, measures, average

bmaggie

Session 2: Quantitative Methods: Basic Concepts
Reading 7: Statistical Concepts and Market Returns

LOS e: Define, calculate, and interpret measures of central tendency, including the population mean, sample mean, arithmetic mean, weighted average or mean (including a portfolio return viewed as a weighted mean), geometric mean, harmonic mean, median, and mode.

 

 

 

Consider the following statements about the geometric and arithmetic means as measures of central tendency. Which statement is least accurate?

A) The difference between the geometric mean and the arithmetic mean increases with an increase in variability between period-to-period observations.

B) The geometric mean calculates the rate of return that would have to be earned each year to match the actual, cumulative investment performance.

C) The geometric mean may be used to estimate the average return over a one-period time horizon because it is the average of one-period returns.

kison

xx

zaestau

c

bmaggie

Which of the following statements about the arithmetic mean is least accurate?

A) The arithmetic mean of a frequency distribution is equal to the sum of the class frequency times the midpoint of the frequency class all divided by the number of observations.

B) The arithmetic mean is the only measure of central tendency where the sum of the deviations of each observation from the mean is always zero.

C) If the distribution is skewed to the left then the mean will be greater than the median.

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If the distribution is skewed to the left, then the mean will be less than the median.

bmaggie

Which of the following statements about the median is least accurate? It is:

A) equal to the 50th percentile.

B) equal to the mode in a normal distribution.

C) more affected by extreme values than the mean.

bmaggie

Which of the following statements about the median is least accurate? It is:

A) equal to the 50th percentile.

B) equal to the mode in a normal distribution.

C) more affected by extreme values than the mean.

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Median is less influenced by outliers since the median is computed as the “middle” observation. On the other hand, all of the data including outliers are used in computing the mean. Both remaining statements are true regarding the median.

bmaggie

Which of the following statements about the arithmetic mean is least accurate?

A) The arithmetic mean of a frequency distribution is equal to the sum of the class frequency times the midpoint of the frequency class all divided by the number of observations.

B) The arithmetic mean is the only measure of central tendency where the sum of the deviations of each observation from the mean is always zero.

C) If the distribution is skewed to the left then the mean will be greater than the median.

bmaggie

An investor has the following assets:

• $5,000 in bonds with an expected return of 8%.
• $10,000 in equities with an expected return of 12%.
• $5,000 in real estate with an expected return of 10%.

What is the portfolio's expected return?

A) 10.00%.

B) 10.50%.

C) 11.00%.

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Expected return is the weighted average of the individual expected values. The expected return is: [(5,000) × (10.00) + (5,000) × (8.00) + (10,000) × (12.00)] / 20,000 = 10.50%.

bmaggie

A portfolio is equally invested in Stock A, with an expected return of 6%, and Stock B, with an expected return of 10%, and a risk-free asset with a return of 5%. The expected return on the portfolio is:

A) 7.0%.

B) 8.0%.

C) 7.4%.

bmaggie

A portfolio is equally invested in Stock A, with an expected return of 6%, and Stock B, with an expected return of 10%, and a risk-free asset with a return of 5%. The expected return on the portfolio is:

A) 7.0%.

B) 8.0%.

C) 7.4%.

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(0.333)(0.06) + (0.333)(0.10) + 0.333(0.05) = 0.07