Quant 1.12 10.01

None

• A. 0.20.
• B. 0.35.
• C. 0.85.

Monte Carlo simulation is best described as:

• A. providing a distribution of possible solutions to complex functions.
• B. a restrictive form of scenario analysis.
• C. an approach to back-test data.

Q. An estimator with an expected value equal to the parameter that it is intended to estimate is described as:

• A. efficient.
• B. unbiased.
• C. consistent.

The distribution of all the distinct possible values for a statistic when calculated from samples of the same size randomly drawn from the same population is most accurately referred to as:

• A. a discrete uniform distribution.
• B. a multivariate normal distribution.
• C. the sampling distribution of a statistic.

Perkiomen Kinzua, a seasoned auditor, is auditing last year’s transactions for Conemaugh Corporation. Unfortunately, Conemaugh had a very large number of transactions last year, and Kinzua is under a time constraint to finish the audit. He decides to audit only the small subset of the transaction population that is of interest and to use sampling to create that subset. Q. The most appropriate sampling method for Kinzua to use is:

• A. judgmental sampling.
• B. systematic sampling.
• C. convenience sampling.

Q. A stock is priced at $100.00 and follows a one-period binomial process with an up move that equals 1.05 and a down move that equals 0.97. If 1 million Bernoulli trials are conducted and the average terminal stock price is $102.00, the probability of an up move (p) is closest to:

• A. 0.375.
• B. 0.500.
• C. 0.625.

None

• A. 45.50%.
• B. 42.25%.
• C. 22.75%.

Q. A report on long-term stock returns focused exclusively on all currently publicly traded firms in an industry is most likely susceptible to:

• A. look-ahead bias.
• B. survivorship bias.
• C. intergenerational data mining.

Which statement is most accurate when considering a multivariate normal distribution for the returns on 10 stocks from different sectors? There are:

• A. 45 distinct correlations not equal to one.
• B. 90 distinct correlations not equal to one.
• C. 100 distinct correlations.

Q. If an estimator is consistent, an increase in sample size will increase the:

• A. accuracy of estimates.
• B. efficiency of the estimator.
• C. unbiasedness of the estimator.