Exam Chapter 03

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

1) The terms central location or central tendency refer to the way quantitative data tend to T or F
cluster around some middle or central value.
Answer: True False

2) The arithmetic mean is the middle value of a data set. T or F

Answer: True False

3) Approximately 60% of the observations in a data set fall below the 60th percentile. T or F
Answer: True False

4) The median is not always the 50th percentile. T or F

Answer: True False

5) In a data set, an outlier is a large or small value regarded as an extreme value in the data T or F
set.
Answer: True False

6) A box plot is useful when comparing similar information gathered at different places or T or F
times.
Answer: True False

7) The geometric mean is a multiplicative average of a data set. T or F

Answer: True False

8) The mean absolute deviation (MAD) is a less effective measure of variation when T or F
compared with the average deviation from the mean.
Answer: True False

9) The variance and standard deviation are the most widely used measures of central T or F
location.
Answer: True False

10) The standard deviation is the positive square root of the variance. T or F
Answer: True False

11) The variance is an average squared deviation from the mean. T or F

Answer: True False

12) The coefficient of variation is a unit-free measure of dispersion. T or F

Answer: True False

Exam Chapter 03 pg-1

13) Mean-variance analysis suggests that investments with lower average returns are also T or F
associated with higher risks.
Answer: True False

14) The Sharpe ratio measures the extra reward per unit of risk. T or F
Answer: True False

15) Chebyshev's theorem is only applicable for sample data. T or F

Answer: True False

16) The empirical rule is only applicable for approximately bell-shaped data. T or F
Answer: True False

17) Z-scores can always be used to detect outliers. T or F

Answer: True False

18) The formula for a z-score is T or F

Answer: True False

19) Outliers are extreme values above or below the mean that require special consideration. T or F
Answer: True False

20) Mark's grade on the recent business statistics test was an 85 on a scale of 0-100. Based on T or F
this information we can conclude that Mark's grade was in the 85th percentile in his class.
Answer: True False

21) Geometric mean is greater than the arithmetic mean. T or F

Answer: True False

22) In quality control settings, businesses prefer a larger standard deviation, which is an T or F
indication of more consistency in the process.
Answer: True False

23) The z-score has no units even though the original values will normally be expressed in T or F
units such as dollars, years, pounds, or calories.
Answer: True False

24) When working with grouped data, the class median is the value in the middle of the class T or F
and can be found by taking the average of the endpoints for each class.
Answer: True False

Exam Chapter 03 pg-2

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.

25) The median is defined as the________. 25)

A) middle point in a data set. B) geometric average of a data set.
C) arithmetic average of a data set. D) most common value of a data set.
Answer: A

26) The mode is defined as the ________. 26)

A) middle point in a data set. B) geometric average of a data set.
C) arithmetic average of a data set. D) most frequent value in a data set.
Answer: D

27) Which of the following is the most influenced by outliers? 27)

A) Mode B) Median
C) 75th percentile D) Arithmetic mean
Answer: D

28) How do we find the median if the number of observations in a data set is odd? 28)
A) By averaging the first and the third quartile
B) By taking the middle value in the sorted data set
C) By averaging the minimum and maximum values
D) By taking the middle value in the sorted data set after eliminating outliers
Answer: B

29) Is it possible for a data set to have no mode? 29)

A) Yes, if two observations occur twice.
B) No, unless there is an odd number of observations.
C) No, if the data set is nonempty, there is always a mode.
D) Yes, if there are no observations that occur more than once.
Answer: D

30) Is it possible for a data set to have more than one mode? 30)
A) No, there must always be a single mode, or else there is no mode.
B) Yes, if two or more values in a data set occur the same number of times.
C) Yes, if there are at least two different values in a data set, there is always more
than one mode.
D) Yes, if two or more values in a data set occur with the most frequency and the
frequency is greater than one.
Answer: D

Exam Chapter 03 pg-3

31) The Boom company has recently decided to raise the salaries of all employees by 31)
10%.Which of the following is(are) expected to be affected by this raise?
A) Mean and mode only B) Mean and median only
C) Mode and median only D) Mean, median, and mode
Answer: D

32) The owner of a company has recently decided to raise the salary of one employee, who 32)
was already making the highest salary, by 20%. Which of the following is(are) expected
to be affected by this raise?
A) Mean only B) Median only
C) Mean and median only D) Mean, median, and mode
Answer: A

33) The table below gives the deviations of a portfolio's annual total returns from its benchmark's
33)
annual returns, for a 6-year period ending in 2011.

Portfolio's deviations from Benchmark Return,

2006-2011
2006 –7.62%
2007 2.37%
2008 –9.11%
2009 0.55%
2010 5.48%
2011 –1.67%

The arithmetic mean return and median return are the closest to ________.
A) mean = –2.00% and median = –4.28%.
B) mean = –2.00% and median = –1.67%.
C) mean = –1.67% and median = –0.56%.
D) mean = –1.67% and median = 0.56%
Answer: C

34) Which of the following statements is most accurate when defining percentiles? 34)
A) The pth percentile divides a data set into equal parts.
B) Approximately p% of the observations are greater than the pth percentile.
C) Approximately (100 – p)% of the observations are less than the pth percentile.
D) Approximately (100 – p)% of the observations are greater than the pth percentile.
Answer: D

Exam Chapter 03 pg-4

35) Which five values are graphed on a box plot? 35)
A) Min, Quintile 1, Mean, Quintile 3, Max
B) Min, Quartile 1, Mean, Quartile 3, Max
C) Min, Quintile 1, Median, Quintile 3, Max
D) Min, Quartile 1, Median, Quartile 3, Max
Answer: D

36) What is the interquartile range? 36)

A) Q3 – Q1 B) Max – Min
C) Mean – Median D) All values between Q1 and Q3
Answer: A

37) Consider the following data: 1, 2, 4, 5, 10, 12, 18. The 30th percentile is the closest to 37)
________.
A) 2.0 B) 2.4 C) 2.8 D) 5.0
Answer: C

38) Calculate the interquartile range from the following data: 1, 2, 4, 5, 10, 12, 18. 38)
A) 5 B) 6 C) 10 D) 17
Answer: C

39) As of September 30, 2011, the earnings per share, EPS, of five firms in the beverages 39)
industry are as follows: 1.13 2.41 1.52 1.40 0.41 The 25 th percentile and the 75th
percentile of the EPS are the closest to ________.
A) 0.77 and 1.97 B) 0.91 and 1.77
C) 1.77 and 0.91 D) 1.97 and 0.77
Answer: A

40) In what way(s) is(are) the concept of geometric mean useful? 40)
A) In evaluating investment returns
B) In calculating average growth rates
C) In assessing the dispersion of the data
D) Both in evaluating investment returns and in calculating average growth rates
Answer: D

41) What is(are) characteristic(s) of the geometric mean? 41)

A) It is always greater than the arithmetic mean.
B) It is the mathematical equivalent to the median.
C) It is always less than or equal to the arithmetic mean.
D) Both it is the mathematical equivalent to the median and it is always less than or
equal to the arithmetic mean.
Answer: C

Exam Chapter 03 pg-5

42) Sales for Adidas grew at a rate of 0.5196 in 2006, 0.0213 in 2007, 0.0485 in 2008, and 42)
–0.0387 in 2009. The average growth rate for Adidas during these four years is the
closest to ________.
A) 3.49% B) 11.83% C) 13.77% D) 14.02%
Answer: B

43) Total revenue for Apple Computers(in millions) was $42,905 in 2009, $65,225 in 2010, 43)
and $108,249 in 2011. The average growth rate of revenue during these three years is
the closest to ________.
A) 36.13% B) 39.33% C) 58.84% D) 58.99%
Answer: C

44) The following data represent monthly returns (in percent): 44)
–7.24 1.64 3.48 –2.49 9.30
The geometric mean return is the closest to ________.
A) –0.43% B) 0.78% C) 0.94% D) 4.79%
Answer: B

45) A portfolio manager generates a 5% return in 2008, a 12% return in 2009, a negative 45)
6% return in 2010, and a return of 2% (nonannualized) in the first quarter of 2011. The
annualized return for the entire period is the closest to ________.
A) 3.05% B) 3.25% C) 3.50% D) 3.77%
Answer: D

46) The range is defined as ________. 46)

A) Q3 – Q1 B) Max – Q1
C) Max – Min D) Max – Median
Answer: C

47) What is(are) the most widely used measure(s) of dispersion? 47)
A) Range
B) Interquartile range
C) Variance and standard deviation
D) Covariance and the correlation coefficient
Answer: C

48) What is the relationship between the variance and the standard deviation? 48)
A) The standard deviation is the absolute value of the variance.
B) The variance is the absolute value of the standard deviation.
C) The variance is the positive square root of the standard deviation.
D) The standard deviation is the positive square root of the variance.
Answer: D

Exam Chapter 03 pg-6

49) Which of the following statements about variance is the most accurate? 49)
A) Variance is the square root of the standard deviation.
B) Variance can be both, positive or negative.
C) Variance is denominated in the same units as the original data.
D) Variance is the average of the squared deviations from the mean.
Answer: D

50) Which of the following statements about the mean absolute deviation (MAD) is the 50)
most accurate?
A) It is the square root of the standard deviation.
B) It can be a positive number or a negative number.
C) It is denominated in the same units as the original data.
D) It is the arithmetic mean of the squared deviations from the mean.
Answer: C

51) An analyst gathered the following information about the net profit margins of companies in51)
two
industries:

Net Profit Margin Industry A Industry B

Mean 15.0% 5.0%
Standard deviation 2.0% 0.8%
Range 10.0% 15%

Compared with the other industry, the relative dispersion of net profit margins is smaller for
Industry ________.
A) B, because it has a smaller mean deviation.
B) B, because it has a smaller range of variation.
C) A, because it has a smaller standard deviation.
D) A, because it has a smaller coefficient of variation.
Answer: D

52) Consider a population with data values of 52)

12 8 28 22 12 30 14.
The population mean is ________.
A) 12. B) 14. C) 18. D) 22.
Answer: C

53) Consider a population with data values of 53)

12 8 28 22 12 30 14.
The median is ________.
A) 12 B) 14 C) 18 D) 22
Answer: B

Exam Chapter 03 pg-7

54) Consider a population with data values of 54)
12 8 28 22 12 30 14.
The mode is ________.
A) 12 B) 14 C) 18 D) 22
Answer: A

55) Consider a population with data values of 55)

12 8 28 22 12 30 14.
The population variance is the closest to ________.
A) 8.00 B) 8.64 C) 64.00 D) 74.67
Answer: C

56) Consider a population with data values of 56)

12 8 28 22 12 30 14.
The population standard deviation is the closest to ________.
A) 8.00 B) 8.64 C) 64.00 D) 74.67
Answer: A

57) The sample data below shows the number of hours spent by five students over the weekend57)
to
prepare for Monday's Business Statistics exam.
3 12 2 3 5.
The mean and the median of the numbers of hours spent by the five students are ________.
A) 2 hours and 5 hours, respectively B) 3 hours and 5 hours, respectively
C) 5 hours and 2 hours, respectively D) 5 hours and 3 hours, respectively
Answer: D

58) The sample data below shows the number of hours spent by five students over the weekend58) to
prepare for Monday's Business Statistics exam.
3 12 2 3 5.
The sample standard deviation of the number of hours spent by the five students is the closest to
________.
A) 3.6 hours B) 4.1 hours C) 13.2 hours D) 16.5 hours
Answer: B

59) The sample data below shows the number of hours spent by five students over the weekend59)
to
prepare for Monday's Business Statistics exam.
3 12 2 3 5.
The 75th percentile of the data is the closest to ________.
A) 3 hours B) 4.5 hours C) 8.5 hours D) 10 hours
Answer: C

Exam Chapter 03 pg-8

60) The sample data below shows the number of hours spent by five students over the weekend60)
to
prepare for Monday's Business Statistics exam.
3 12 2 3 5.
The interquartile range of the data is the closest to ________.
A) 4 hours B) 6 hours C) 10 hours D) 12 hours
Answer: B

61) A bowler's scores for a sample of six games were 61)

172 168 188 190 172 182 174.
The bowler's average score is ________.
A) 172 B) 174 C) 178 D) 190
Answer: C

62) A bowler's scores for a sample of six games were 62)

172 168 188 190 172 182 174.
The bowler's median score is ________.
A) 172 B) 174 C) 178 D) 190
Answer: B

63) A bowler's scores for a sample of six games were 63)

172 168 188 190 172 182 174.
The bowler's modal score is ________.
A) 172 B) 174 C) 178 D) 190
Answer: A

64) A bowler's scores for a sample of six games were 64)

172 168 188 190 172 182 174.
The sample standard deviation is the closest to ________.
A) 8.00 B) 8.64 C) 64.00 D) 74.67
Answer: B

65) Professors at a local university earn an average salary of $80,000 with a standard 65)
deviation of $6,000. With the beginning of the next academic year, all professors will
get a 2% raise. What will be the average and the standard deviation of their new
salaries?
A) $80,000 and $6,120. B) $81,600 and $6,000.
C) $81,600 and $6,120. D) $82,000 and $6,200.
Answer: C

Exam Chapter 03 pg-9

66) The annual returns (in percent) for a sample of stocks in the technology industry over the past
66)
year are as follows:
4.2 –9.4 2.8 –16.0 –6.6.
The average return is the closest to ________.
A) –6.6 B) –5 C) 0 D) 2.8
Answer: B

67) The annual returns (in percent) for a sample of stocks in the technology industry over the past
67)
year are as follows:
4.2 –9.4 2.8 –16.0 –6.6.
The median return is the closest to ________.
A) –6.6 B) –5 C) 0 D) 2.8
Answer: A

68) The annual returns (in percent) for a sample of stocks in the technology industry over the past
68)
year are as follows:
4.2 –9.4 2.8 –16.0 –6.6.
The sample standard deviation is the closest to ________.
A) 7.59 B) 8.49 C) 57.61 D) 72.01
Answer: B

69) The coefficient of variation is best described as ________. 69)

A) a relative measure of dispersion
B) an absolute measure of dispersion
C) a relative measure of central location
D) an absolute measure of central location
Answer: A

70) What is(are) the characteristic(s) of the coefficient of variation? 70)

A) It adjusts for differences in the magnitude of means.
B) It has the same units of measurement as the observations.
C) It allows for direct comparisons across different data sets.
D) Both it adjusts for differences in the magnitude of means and it allows for direct
comparisons across different data sets.
Answer: D

71) The mean return on equity (ROE) for a group of firms in an industry is 15% with a 71)
variance of 9%. The coefficient of variation of the industry's ROE is ________.
A) 0.2 B) 0.6 C) 1.7 D) 5.0
Answer: A

Exam Chapter 03 pg-10

72) The advantage of using mean absolute deviation rather than variance as a measure of 72)
dispersion is that mean absolute deviation ________.
A) is less sensitive to extreme deviations
B) requires fewer observations to be a valid measure
C) is a relative measure rather than an absolute measure of risk
D) considers only unfavorable (negative) deviations from the mean
Answer: A

73) A college professor collected data on the number of hours spent by his 100 students over the
73)
weekend to prepare for Monday's Business Statistics exam. He processed the data by Excel and
the following incomplete output is available.

Mean 7
Sample Variance 7.84
Skewness 1.17

The median is most likely to be ________.

A) about 7 hours
B) less than 7 hours
C) greater than 7 hours
D) Cannot tell from the information provided
Answer: B

74) A college professor collected data on the number of hours spent by his 100 students over the
74)
weekend to prepare for Monday's Business Statistics exam. He processed the data by Excel and
the following incomplete output is available.

Mean 7
Sample Variance 7.84
Skewness 1.17

The coefficient of variation in the data is ________.

A) 40% B) 90% C) 111% D) 243%
Answer: A

75) The price to earnings ratio, also called the P/E ratio of a stock, is a measure of the price 75)
of a share relative to the annual net income per share earned by the firm. Suppose the
P/Es for a firm's common stock during the past four quarters are 10, 12, 15, and 11,
respectively. The standard deviation of the P/E ratio over the four quarters is ________.
A) 1.87 B) 2.16 C) 3.50 D) 4.67
Answer: B

Exam Chapter 03 pg-11

76) As of September 30, 2011, the earnings per share (EPS) of five firms in the biotechnology 76)
industry are
1.53 2.29 2.07 1.69 0.07.
The sample mean and the sample standard deviation are the closest to ________.
A) 1.53 and 0.76 B) 1.53 and 0.87
C) 1.69 and 0.76 D) 1.69 and 0.87
Answer: B

77) A portfolio's annual total returns (in percent) for a five-year period are: 77)
–7.14 1.62 2.50 –2.50 9.27.
The median and the standard deviation for this sample are the closest to ________.
A) 0.75 and 5.46 B) 1.62 and 5.46
C) 1.62 and 6.11 D) 2.50 and 6.11
Answer: C

78) The Sharpe ratio measures________. 78)

A) the extra reward per unit of risk B) the extra risk per unit of reward
C) the increase in mean per unit of risk D) the extra variance per unit of reward
Answer: A

79) The table below gives statistics relating to a hypothetical 10-year record of two portfolios. 79)
Assume other statistics relating to these portfolios are the same and the risk-free rate is 3.5%.
Using the coefficient of variation and the Sharpe ratio, the fund that is preferred in terms of
relative risk and return per unit of risk is: ________.

Arithmetic Mean Return Standard Deviation of Return

Portfolio A 15.3% 22.8%
Portfolio B 10.2% 15.9%

Using the coefficient of variation and the Sharpe ratio, the fund that is preferred in terms of
relative risk and return per unit of risk is ________.
A) Portfolio A because it has a higher coefficient of variation and a lower Sharpe
ratio
B) Portfolio A because it has a lower coefficient of variation and a higher Sharpe
ratio
C) Portfolio B because it has a higher coefficient of variation and a lower Sharpe
ratio
D) Portfolio B because it has a lower coefficient of variation and a higher Sharper
ratio
Answer: B

Exam Chapter 03 pg-12

80) The following table summarizes selected statistics for two portfolios for a 10-year period ending
80)
in 2006. Assume that the risk-free rate is 4% over this period.

Arithmetic Mean Standard Deviation of Return

Fund A 11.64% 12.65%
Fund B 12.58% 18.44%

As measured by the Sharpe ratio, the fund with the superior risk-adjusted performance during
this period is ________.
A) Fund A because it has a lower positive Sharpe ratio than Fund B
B) Fund B because it has a lower positive Sharpe ratio than Fund A
C) Fund A because it has a higher positive Sharpe ratio than Fund B
D) Fund B because it has a higher positive Sharpe ratio than Fund A
Answer: C

81) For k> 1, Chebyshev's theorem is useful in estimating the proportion of observations 81)
that fall within ________.
A) k standard deviations from the mean
B) k2 standard deviations from the mean
C) (1 – 1/k) standard deviations from the mean
D) (1 – 1/k2) standard deviations from the mean
Answer: A

82) Chebyshev's theorem is applicable when the data are________. 82)

A) any shape
B) skewed to the left
C) skewed to the right
D) approximately symmetric and bell-shaped
Answer: A

83) Which of the following capabilities does Analysis of Relative Location provide? 83)
A) They make statements regarding the shape of the data.
B) They make statements regarding the central location of the data.
C) They make statements regarding the dispersion of the data around the median.
D) They make statements regarding the percentage of data values that fall within
some number of standard deviations from the mean.
Answer: D

Exam Chapter 03 pg-13

84) What is the difference between Analysis of Relative Location and the empirical rule? 84)
A) The empirical rule applies to all data sets, whether their distributions are
symmetric and bell-shaped or not.
B) Chebyshev's theorem applies to all data sets except those that have approximately
a symmetric and bell-shaped distribution.
C) The empirical rule applies to all data sets, whereas Chebyshev's theorem is
appropriate when the data have approximately a symmetric and bell-shaped
distribution.
D) Chebyshev's theorem applies to all data sets, whereas the empirical rule is only
appropriate when the data have approximately a symmetric and bell-shaped
distribution.
Answer: D

85) In its standard form, Chebyshev's theorem provides a lower bound on ________ 85)
A) the number of observations lying within a certain interval
B) the number of observations lying outside a certain interval
C) the proportion (or percentage) of observations lying within a certain interval
D) the proportion (or percentage) of observations lying outside a certain interval
Answer: C

86) The empirical rule can be used to estimate some proportions________. 86)
A) when data has any shape.
B) when it is skewed to the left.
C) when it is skewed to the right.
D) when it is approximately symmetric and bell-shaped.
Answer: D

87) When applicable, the empirical rule provides the approximate percentage of 87)
observations that fall within
A) 1, 2, or 3 standard deviations.
B) 2, 3, or 4 standard deviations.
C) k standard deviations for every k> 1.
D) 1 – 1/k2 standard deviations for every k> 1.
Answer: A

88) Which of the following is true when using the empirical rule for a set of sample data? 88)
A) Almost all observations are in the interval
B) Approximately 68% of all observations are in the interval
C) Approximately 95% of all observations are in the interval
D) Approximately 68% of all observations are in the interval
Answer: B

Exam Chapter 03 pg-14

89) When using the empirical rule, which of the following assumptions is made? 89)
A) The data only comes from a sample.
B) The data only comes from a population.
C) The data are exactly symmetric and bell-shaped.
D) The data are approximately symmetric and bell-shaped.
Answer: D

90) In a marketing class of 60 students, the mean and the standard deviation of scores was 90)
70 and 5, respectively. Use Chebyshev's theorem to determine the number of students
who scored less than 60 or more than 80.
A) At least 45 B) At most 15 C) At most 45 D) At least 15
Answer: B

91) In an accounting class of 200 students, the mean and standard deviation of scores was 91)
70 and 5, respectively. Use the empirical rule to determine the number of students who
scored less than 65 or more than 75.
A) It is about 32. B) It is about 64.
C) It is about 68. D) It is about 136.
Answer: B

92) Professors at a local university earn an average salary of $80,000 with a standard 92)
deviation of $6,000. Using Chebyshev's inequality, the percentage of salaries falling
between $68,000 and $92,000 is at least ________.
A) 65% B) 68% C) 75% D) 95%
Answer: C

93) Professors at a local university earn an average salary of $80,000 with a standard 93)
deviation of $6,000. The salary distribution cannot be regarded as bell-shaped. What
can be said about the percentage of salaries that are less than $68,000 or more than or
more than $92,000?
A) It is at least 75%. B) It is at most 75%.
C) It is at least 25%. D) It is at most 25%.
Answer: D

94) Professors at a local university earn an average salary of $80,000 with a standard 94)
deviation of $6,000. The salary distribution is approximately bell-shaped. What can be
said about the percentage of salaries that are less than $68,000 or more than $92,000?
A) It is about 5%. B) It is about 32%.
C) It is about 68%. D) It is about 95%.
Answer: A

Exam Chapter 03 pg-15

95) Professors at a local university earn an average salary of $80,000 with a standard 95)
deviation of $6,000. The salary distribution is approximately bell-shaped. What can be
said about the percentage of salaries that are at least $74,000?
A) It is about 68%. B) It is about 84%.
C) It is about 95%. D) It is about 97.5%.
Answer: B

96) Professors at a local university earn an average salary of $80,000 with a standard 96)
deviation of $6,000. The salary distribution is approximately bell-shaped. Because of
budget limitations, it has been decided that only those whose salaries are approximately
in the bottom 2.5% would get a raise. What is the maximum current salary that qualifies
for the raise?
A) It is about $58,000. B) It is about $62,000.
C) It is about $68,000. D) It is about $74,000.
Answer: C

97) Amounts spent by a sample of 200 customers at a retail store are summarized in the following
97)
relative frequency distribution.

Amount Spent (in $) Frequency

0 up to 10 15
10 up to 20 75
20 up to 30 55
30 up to 40 55

The mean amount spent by customers is the closest to ________.

A) $17.50 B) $20.00 C) $22.50 D) $50.00
Answer: C

98) Amounts spent by a sample of 200 customers at a retail store are summarized in the following
98)
relative frequency distribution.

Amount Spent (in $) Frequency

0 up to 10 15
10 up to 20 75
20 up to 30 55
30 up to 40 55

The median amount will fall in the following class interval ________.
A) 0 up to 10 B) 10 up to 20 C) 20 up to 30 D) 30 up to 40
Answer: C

Exam Chapter 03 pg-16

 99) Amounts spent by a sample of 50 customers at a retail store are summarized in the following
99)
relative frequency distribution.

Amount Spent (in $) Relative Frequency

0 up to 10 0.20
10 up to 20 0.40
20 up to 30 0.30
30 up to 40 0.10

The mean amount spent by customers is the closest to ________.

A) $0.36 B) $18.00 C) $20.00 D) $25.00
Answer: B

100) Amounts spent by a sample of 50 customers at a retail store are summarized in the following
100)
relative frequency distribution.

Amount Spent (in $) Relative Frequency

0 up to 10 0.20
10 up to 20 0.40
20 up to 30 0.30
30 up to 40 0.10

The median amount will fall in the following class interval ________.
A) 0 up to 10 B) 10 up to 20 C) 20 up to 30 D) 30 up to 40
Answer: B

101) The following frequency distribution represents the number of hours studied per week by a 101)
sample of 50 students.

Amount Spent (in $) Midpoint Frequency

2.5 less than 5.5 4 5
5.5 less than 8.5 7 30
8.5 less than 11.5 10 25

The mean number of hours studied is ________.

A) 7 B) 8 C) 22.8 D) 480
Answer: B

Exam Chapter 03 pg-17

102) The following frequency distribution represents the number of hours studied per week by a 102)
sample of 50 students.

Amount Spent (in $) Midpoint Frequency

2.5 less than 5.5 4 5
5.5 less than 8.5 7 30
8.5 less than 11.5 10 25

The standard deviation of the number of hours studied is ________.

A) 1.89 B) 2.79 C) 3.50 D) 3.56
Answer: A

103) You buy 50 stocks of Company A, 30 of Company B, and 20 of Company C. The 103)
annual returns of these companies are 8%, 12%, and 10% respectively. The average
return for one year is the closest to ________.
A) 9.1% B) 9.6% C) 10.0% D) 10.5%
Answer: B

104) The mean grade of the 30 students in Section 1 is 80. The mean grade of the 40 students 104)
in Section 2 is 85. The mean grade of the 30 students in Section 3 is 80. What is the
mean grade of all students from the three sections combined?
A) 80.00 B) 81.67 C) 82.00 D) 85.00
Answer: C

105) An investor bought common stock of Blackstone Company on several occasions at the following
105)
prices. The following frequency distribution represents the number of hours studied per week by
a sample of 50 students.

Number of Shares Price per Share

100 $34
200 $30
400 $28

The average price per share at which the investor bought these shares of common stock was
the closest to ________.
A) $28.00 B) $29.43 C) $30.67 D) $31.00
Answer: B

Exam Chapter 03 pg-18

106) Automobiles traveling on a road with a posted speed limit of 65 miles per hour are checked106)
for
speed by a state police radar system. The following is a frequency distribution of speeds. The
following frequency distribution represents the number of hours studied per week by a sample of
50 students.

Speed (miles per hour) Frequency

45 up to 55 50
55 up to 65 325
65 up to 75 275
75 up to 85 25

The mean speed of the automobiles traveling on this road is the closest to ________.
A) 55.0 B) 57.8 C) 64.1 D) 65.0
Answer: C

107) Automobiles traveling on a road with a posted speed limit of 65 miles per hour are checked107)
for
speed by a state police radar system. The following is a frequency distribution of speeds.

Speed (miles per hour) Frequency

45 up to 55 50
55 up to 65 325
65 up to 75 275
75 up to 85 25

The standard deviation of this distribution is the closest to ________.

A) 5.35 B) 6.81 C) 9.54 D) 10.25
Answer: B

108) What does the covariance measure? 108)

A) The direction of a linear relationship between two variables.
B) The direction of a curvilinear relationship between two variables.
C) The direction of a linear relationship between two or more variables.
D) The direction of a curvilinear relationship between two or more variables.
Answer: A

Exam Chapter 03 pg-19

109) When interpreting the covariance between variables x and y, which of the following 109)
statements is the most accurate?
A) A negative value of covariance that, on average, if x is below its mean, then y
tends to be below its mean.
B) A positive value of covariance indicates that, on average, if x is above its mean,
then y tends to be above its mean.
C) A positive value of covariance indicates that, on average, if x is above its mean,
then y tends to be below its mean.
D) A negative value of covariance indicates that, on average, if x is above its mean,
then y tends to be above its mean.
Answer: B

110) What is an advantage of the correlation coefficient over the covariance? 110)
A) It falls between 0 and 1.
B) It falls between –1 and 1.
C) It is a unit-free measure, therefore making it easier to interpret.
D) Both answers-that it falls between –1 and 1 and that it is a unit-free measure-are
correct.
Answer: D

111) Which of the following relationships can be concluded from examining the correlation 111)
coefficient?
A) No relationship B) A positive relationship
C) A negative relationship D) All of the above
Answer: D

112) The covariance between the returns of A and B is –0.112.The standard deviation of the 112)
rates of return is 0.26 for stock A and 0.81 for stock B. The correlation of the rates of
return between A and B is the closest to ________.
A) –1.88 B) –0.53 C) 0.53 D) 1.88
Answer: B

113) The covariance between the returns on two assets is negative. This occurs when 113)
________.
A) the variance of one asset has a negative linear relationship with the variance of the
other asset
B) the standard deviation of one asset has a positive linear relationship with the
standard deviation of the other asset
C) on average, the return on one asset is below its expected value and the return on
the other asset is above its expected value
D) on average, the return on one asset is below its expected value and the return on
the other asset is below its expected value
Answer: C

Exam Chapter 03 pg-20

114) The covariance between the returns of stock A and stock B is –125. The standard 114)
deviation of the rates of return is 20 for stock A and 10 for stock B. The correlation
coefficient of the rates of return between A and B is closest to ________.
A) –0.625 B) –0.375 C) 0.375 D) 0.625
Answer: A

115) The daily high temperature in Philadelphia over an eight-day period is shown below. 115)
69 77 70 81 84 86 69 70
The median for this data set is ________.
A) 69 B) 70 C) 73.5 D) 77
Answer: C

116) The following data represents the actual talk time, in hours, for the iPhone for 11 users. 116)
25.1 19.1 21.6 9.5 20.3 18.0 24.6 25.2 21.9 29.7 28.5
The 60th percentile of this data set is ________.
A) 21.6 B) 21.9 C) 23.3 D) 24.6
Answer: D

117) The following data represents the actual talk time, in hours, for the iPhone for 11 users. 117)
25.1 19.1 21.6 9.5 20.3 18.0 24.6 25.2 21.9 29.7 28.5
What percentile is the talk time of 21.6 hours?
A) 41st B) 49th C) 54th D) 58th
Answer: A

118) The following data represent the wait time, in minutes, for customers calling Dell technical118)
support.
14 21 37 24 19 12 16 69 13
The interquartile range is ________.
A) 7 minutes B) 9 minutes C) 10 minutes D) 12 minutes
Answer: B

119) The following data represent the wait time, in minutes, for customers calling Dell technical119)
support.
14 21 37 24 19 12 16 69 13
The upper limit for determining outliers for a box-and-whicker plot is ________.
A) 29.5 minutes B) 31 minutes C) 33.5 minutes D) 36 minutes
Answer: A

120) The ________ identifies the number of standard deviations a particular value is from 120)
the mean of its distribution.
A) coefficient of variation B) z-score
C) median D) empirical rule
Answer: B

Exam Chapter 03 pg-21

121) Which of the following is not true concerning the attributes of z-scores? 121)
A) z-scores are positive for data values above the mean of the distribution.
B) z-scores are negative for data values below the mean of the distribution.
C) z-scores can be positive or negative for data values above the mean of the
distribution.
D) z-scores are equal to zero for data values equal to the mean of the distribution.
Answer: C

122) The average class size this semester in the business school of a particular university is 122)
38.1 students with a standard deviation of 12.9 students. The z-score for a class with 21
students is ________.
A) –1.33 B) 0 C) 0.8 D) 1.51
Answer: A

123) Suppose the wait to pass through immigration at JFK Airport in New York is thought to 123)
be bell-shaped and symmetrical with a mean of 22 minutes. It is known that 68% of
travelers will spend between 16 and 28 minutes waiting to pass through immigration.
The standard deviation for the wait time through immigration is ________.
A) 6 minutes B) 8 minutes C) 9 minutes D) 10 minutes
Answer: A

124) Suppose the dealer incentive per vehicle for Honda's Acura brand in 2012 is thought to 124)
be bell-shaped and symmetrical with a mean of $2,500 and a standard deviation of
$300. Based on this information, what interval of dealer incentives would we expect
approximately 99.7% of vehicles to fall within?
A) $2,200 to $2,800 B) $1,900 to $3,100
C) $1,600 to $3,400 D) $1,300 to $3,700
Answer: C

125) Suppose the average price for new cars in 2012 has a mean of $30,100 and a standard 125)
deviation of $5,600. Based on this information, what interval of prices would we expect
at least 89% of new car prices to fall within?
A) $24,500 to $35,700 B) $18,900 to $41,300
C) $13,300 to $46,900 D) $7.700 to $52,500
Answer: C

Exam Chapter 03 pg-22

126) There are five rows of students seated in a marketing class. The following table shows the 126)
number of students in each row and the average score of the most recent test for that row.

Row Number of Students Row Average Score

1 6 82.3
2 7 91.4
3 4 85.0
4 5 78.3
5 6 89.1

What is the average test score for this class?

A) 84.7 B) 85.7 C) 83.0 D) 86.8
Answer: B

127) The director of graduate admissions is analyzing the relationship between scores in the Graduate
127)
Record Examination(GRE) and student performance in graduate school, as measured by a
student's GPA. The table below shows a sample of 10 students.

GRE 1,500 1,400 1,00 1,050 1,100 1,250 800 850 950 1,350
GPA 3.4 3.5 3.0 2.9 3.0 3.3 2.7 2.8 3.2 3.3

The covariance is ________.

A) 53.5 B) 51.75 C) 57.5 D) 58.75
Answer: C

128) The director of graduate admissions is analyzing the relationship between scores in the GRE
128)
and
student performance in graduate school, as measured by a student's GPA. The table below shows
sample of 10 students.

GRE 1,500 1,400 1,00 1,050 1,100 1,250 800 850 950 1,350
GPA 3.4 3.5 3.0 2.9 3.0 3.3 2.7 2.8 3.2 3.3

Which of the following statements is correct?

A) The correlation between GRE and GPA is negative and weak.
B) The correlation between GRE and GPA is positive and weak.
C) The correlation between GRE and GPA is negative and strong.
D) The correlation between GRE and GPA is positive and strong.
Answer: D

Exam Chapter 03 pg-23

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the
question.

129) Calculate the mean, median, and mode of the sample data below. 129)
6 3 9 5 3 7 8 1
Answer: Mean = 5.25, Median = 5.5, Mode = 3
The sample mean is computed as The median is the middle value of
a data set. The mode is the most frequently occurring value in a data set.

130) Janice Anooshian asks eight of her friends about the number of hours they spend daily
130)on
Facebook. Their responses are:
2 1 1 8 2 1 1 2.
Calculate the mean, median, and mode numbers of hours her friends spent on Facebook.
Does the mean accurately reflect the center of the data?
Answer: Mean = 2.25 hours, Median = 1.5, Mode = 1.
No.

131) The following represent the sizes of fleece jackets for kids sold at a local Old Navy 131)
Store:
6 7 4 8 1 0 4 5 4 4 6
Calculate the mean, median, and mode size of fleece jackets for kids. Which of these
measures of the central location represents the age that the store would like to target for
advertisement dollars?
Answer: Mean = 5.8, Median = 5.5, Mode = 4.

132) The following data are a list of the magnitudes of six of Alaska's largest recorded 132)
earthquakes.
9.2 7.9 8.7 8.6 7.9 8.1
Calculate the mean, median, and mode of the magnitude of Alaska's Earthquakes.
Answer: Mean = 8.4, Median = 8.35, Mode = 7.9

133) The following is a list of the number of touchdowns LaDainian Tomlinson scored in133)
five
nonconsecutive years as a running back in the NFL.
10 11 28 14 12
Calculate the mean, and the median of the number of touchdowns LT scored. Does the
mean accurately reflect the center of the data?
Answer: Mean = 15 TD, Median = 12. No, it is sensitive to the outlier of 28.

Exam Chapter 03 pg-24

134) The following sample data shows the starting salaries of six graduates from the 134)
accounting program at California Polytechnic State University. The data are in
thousands of dollars.
24 46 48 52 56 58 60
a. Calculate and interpret the 25th, 50th, and 75th percentiles.
b. Are there any outliers? Is the distribution symmetric? If not, comment on its
skewness.
Answer: a. 25th percentile is 46; 50th percentile is 52; 75th percentile is 58.
b. Yes, 24 is an outlier; Not symmetric; Negatively skewed.

135) John lives in Los Angeles and hates the traffic. He asked a sample of 6 of his coworkers
135)
who live all over Los Angles how many hours they spend commuting every year. These
are their responses in hours per year.
20 240 260 300 310 570
a. Calculate and interpret the 30th, 50th, and 70th percentiles.

b. Are there any outliers? Is the distribution symmetric? If not, comment on its
skewness.
Answer: a. 30th percentile is 242; 50th percentile is 280; 70th percentile is 309.
b. Yes 20 and 570 are outliers. Yes it is Symmetric.

136) The following are daily returns for the Dow Jones Industrial average during the 136)
week of October 13th 2008.
The returns are rounded to the nearest whole number.
11% –1.00% –8.00% 5.00% –1.00%
a. Calculate the arithmetic mean return.
b. Calculate the geometric mean return.
Answer: a. 1.2% b. 1.00%

Exam Chapter 03 pg-25

137) The Yearly Prices (rounded to the nearest dollar) for GLD (a gold exchange traded fund)
137)
and SLV (a silver exchange traded fund) are reported in the following table.

Year GLD SLV

Jan-08 $83 $15
Jan-09 $87 $11
Jan-10 $110 $17
Jan-11 $139 $30

a. Calculate the sample variance and sample standard deviation for the GLD ETF and
SLV ETF.
b. Which asset had a greater variance?
c. Which asset had the greater relative dispersion?
Answer: a. For GLD: s2 = 662.92; s = 25.75. For SLV: s2 = 67.58; s = 8.22
b. GLD had a greater variance. For GLD, CV = 0.25; for SLV, CV = 0.45
c. Silver had the greater relative dispersion.

138) The following is a list of average wind speeds at a local surf spot in California over 138)
the
last week.
8 17 19 6 3 9 12

a. What is the range in wind speed?

b. What is the Mean Absolute Deviation of the wind speed?
Answer: a. Range = 16
b. = 10.57, MAD = 4.65

139) The data shows operating expenses (in Millions) for British Petroleum for the years139)
2008 through 2010.

year 2008 2009 2010

Operating Express (Millions) $331,814 $219,712 $312,630

a. Use the growth rates from 2008-2009 and 2009-2010 to calculate the average growth
rate.

b. Calculate the average growth rate directly from sales.

Answer: a. –2.9% b. –2.9%

Exam Chapter 03 pg-26

140) Three investment options are under consideration for inclusion in a mutual fund. Given 140)
that the return on a one-year T-bill is 4.5%, use the Sharpe ratio to select the best option.

Option Mean Return Variance

A 11.3% 1,246.35(%)2
B 7.7% 843.92(%)2
C 5.5% 134.83(%)2

Answer: Option A ratio = 0.1926, Option B ratio = 0.1102, Option C ratio =

0.0861; Option A offers the best reward per unit of risk.

141) The following is return data for a Retail sector ETF and Energy Sector ETF for the years
141)
2007 through 2011.

Year Retail Sector ETF Energy Sector ETF

2007 –0.27 0.45
2008 –0.31 –0.44
2009 0.72 0.33
2010 0.29 0.13
2011 0.1 –0.03

a. What is the arithmetic mean return for each ETF?

b. What is the geometric mean return for each ETF?
c. What is the sample standard deviation for each ETF? Which ETF was riskier over
this time period?
d. Given a risk free rate of 5%. What is the Sharpe Ratio for each ETF? Which
investment had a better return per unit of risk over this time period?
Answer: a. For Retail ETF, the mean = 10.60%; for Energy ETF, the mean = 8.80%
b. For Retail ETF, the geometric mean return = 4.22%; for Energy ETF, the
geometric mean return = 3.43%.
c. For Retail ETF, the standard deviation = 0.42; for Energy ETF, the standard
deviation = 0.34. The Retail ETF is riskier.
d. For Retail ETF, the Sharpe ratio = 0.13; for Energy ETF, the Sharpe ratio =
0.11. The Retain ETF has a higher return per unit of risk.

Exam Chapter 03 pg-27

142) The following table shows the annual returns (in percent) Chevron and Caterpillar for
142)
2007-2010.

Chevron Caterpillar
2007 35% 14%
2008 –20% –30%
2009 3% 30%
2010 15% 55%

a. Which fund had the higher arithmetic average return?

b.Which fund was riskier over this time period?
c.Given a risk-free rate of 1%, which fund has the higher Sharpe ratio? What does this
imply?
Answer: a. Caterpillar has the higher average return.
b. Caterpillar has higher risk.
c. SRChevron = 0.32; SRCaterpillar = 0.45. So Caterpillar has better risk per unit
of reward.

143) The following gives summary measures for Google and Apple for 2005-2010. 143)

Chap003:formula134.gif

a. Which fund had the higher arithmetic average return?

b.Which fund was riskier over this time period?
c.Given a risk-free rate of 1%, which fund has the higher Sharpe ratio? What does this
imply?
Answer: a. Apple
b. Apple
c. Apple has better return per unit of risk

144) The mean starting salary of recent business graduates at a university is $52,000 with144)
a
standard deviation of $16,000. The distribution of starting salaries is unknown.
a. What proportion of business graduates has a starting salary between $20,000 and
$84,000.
b. Suppose 600 business graduates from this university got hired. How many of them
started with a salary between $20,000 and $84,000?
Answer: a. At least 75%
b. At least 450

Exam Chapter 03 pg-28

145) Your used car is expected to last an average of 200,000 miles with a standard deviation
145)
of 25,000 miles before it requires a new transmission.
a. Use Chebyshev's Theorem to approximate the probability that the engine will last
between 150,000 miles and 250,000 miles.
b. Assume a symmetric bell-shaped distribution to approximate the probability that the
engine will last between 150,000 miles and 250,000 miles.
Answer: a. At least 75% of the time.
b. About 95% of the time.

146) The mean starting salary of recent business graduates at a university is $52,000 with146)
a
standard deviation of $16,000. The distribution of starting salaries is assumed to be
symmetric and bell-shaped.
a. What proportion of business graduates has a starting salary between $20,000 and
$84,000.
b. Suppose 600 business graduates from this university got hired. How many of them
started with a salary between $20,000 and $84,000?
Answer: a. About 95%
b. About 570

147) The following data represents motor vehicle theft rates per 100,000 people for the cities
147)
of Detroit, Michigan, Newark, New Jersey, St. Louis, Missouri, Oakland, California,
Atlanta, Georgia, and Fresno, California. These six cities had the highest per-capita
motor vehicle theft rates in the nation in 2010.

City State Avg Vehicle Theft Rate

Detroit Michigan 1400
Newark New Jersey 1290
St. Louis Missouri 1200
Oakland California 1130
Atlanta Georgia 940
Fresno California 940

a. What is the mean and median per-capita theft rates of the above cities?
b. Given the standard deviation of the per-capita crime rate in Detroit is 200 thefts per
100,000 use the empirical rule to calculate the probability Detroit has over 1800
thefts per 100,000 next year?
Answer: a. = 1,150; Median = 1,165
b. 2.5%

Exam Chapter 03 pg-29

148) A luxury apartment complex in South Beach Miami is for sale. The owner has received148)
the following offers in millions of dollars.
64 72 66 58 78 82
a. What is the mean offer price? What is the median offer price? Is the mean a good
measure of central location?
b. What is the sample standard deviation of the offers?
c. What is equivalent to a 75 th percentile offer?
Answer: a. Mean = 70. Yes, it is a good measure of central location; No outliers; Median
= 69
b. Sample Standard Deviation ≈ 9
c. 75th percentile is 79

149) The following data represents the number of unique visitors and the revenue a website
149)
generated for the months of July through December.

Unique Visitors Revenue

July 26 2.2
August 18 3.4
September 14 6.2
October 22 8.6
November 55 5.6
December 75 5.8

a. What is the sample standard deviation for the number of unique visitors and the
revenue?
b. Calculate the coefficient of variations. Which variable has a higher relative
dispersion?
c. Calculate the sample correlation coefficient between the number of unique visitors
and Revenue.
d. Comment on the strength of the linear relationship. What does this mean for the
owner of the website?
Answer: a. The sample standard deviation for the number of visitors = 24.41; the sample
standard deviation for Revenue = 2.25.
b. The coefficient of variation for the number of visitors = 0.70; the coefficient of
variation for Revenue = 0.42; the number of visitors had a higher relative
dispersion.
c. The correlation coefficient between the number of visitors and Revenue =
0.089.
d. The linear relationship is weak. The number of unique visitors is not the major
driver of revenue.

Exam Chapter 03 pg-30

150) The following is a list of GPA ranges and frequencies from a high school. Use 1.5 as
150)
the
midpoint of the 2.0 or less category.

GPA ƒi
2.0 or less 2
2.0-2.5 8
2.5-3 34
3-3.5 4
3.5-4 2

a. What is the mean GPA?

b. What is the sample standard deviation of the GPA
c. Assuming the distribution is bell shaped what percentage of the students would have
GPA's between 1.5 and 3.9? Does this make sense given what you know about GPA's?
Answer: a. Mean GPA = 2.70.
b. Standard deviation = 0.40.
c. Almost all observations are between 1.5 and 3.9. Yes, this makes sense.

151) A surfer visited his favorite beach 50 times and recorded the wave height each time 151)
in
the following table.

Heights of waves in feet Frequency

0 to 2 20
3 to 5 15
6 to 8 10
9 to 11 5
Total 50

a. Calculate the average wave height.

b. Calculate the variance and standard deviation wave height for this sample.
Answer: a. = 4.0
b. s2 = 9.18; s = 3.03

Exam Chapter 03 pg-31

152) A large city in Southern California collected data on education and the unemployment
152)
rate for its residents with a survey. The following is the survey data.

Education Level Frequency Average Unemployment Rate

Less than High School 35 0.12
High School Grad 25 0.09
Some College 20 0.08
College Grad 20 0.05

a. Calculate the mean unemployment rate for the city.

b. Calculate the sample standard deviation unemployment rate in the city.
Answer: a. = 9.05%
b. s = 2.60

153) Yearly returns (rounded to the nearest percent) for GLD a gold exchange traded fund
153)
and
SLV a silver exchange traded fund are reported in the following table.

Year GLD SLV

2007 38% 25%
2008 5% –27%
2009 26% 55%
2010 26% 76%
2011 12% –4%

a. Calculate the covariance between GLD and SLV.

b. Calculate and interpret the correlation coefficient.
Answer: a. sxy = 0.0375 b. rxy = 0.69; strong positive correlation.

Exam Chapter 03 pg-32

Answer Key
Testname: BUS_STATS_CH03

1) TRUE
Explanation: The term central location relates to the way quantitative data tend to cluster around some
middle or central value.
Page Ref:
2) FALSE
Explanation: The median is the middle value of a data set.
Page Ref:
3) TRUE
Explanation: Percentile is defined as the approximate percentage of the observations have values below
the percentile value.
Page Ref:
4) FALSE
Explanation: The median is always the 50th percentile. If n is odd, L50 = (n + 1)/2 is an integer directly
defining the unique middle position in the sorted data set. If n is even, L50 = (n + 1)/2 is the
average of the two middle positions n/2 and n/2 + 1, and hence the median is the average of
the corresponding two middle values.
Page Ref:
5) TRUE
Explanation: Outliers are extremely small or large values in the data set.
Page Ref:
6) TRUE
Explanation: A boxplot or box-and-whisker plot is a convenient way to graphically display the smallest
value, the quartiles, and the largest value.
Page Ref:
7) TRUE
Explanation: The geometric mean is a multiplicative average, as opposed to an additive average.
Page Ref:
8) FALSE
Explanation: The MAD is a much more effective measure. The average deviation from the mean is
actually useless because it is always zero.
Page Ref:
9) FALSE
Explanation: The variance and standard deviation are the most widely used measures of dispersion.
Page Ref:
10) TRUE

Explanation: The standard deviation is the positive square root of the variance:
Page Ref:
11) TRUE

Explanation: The variance is computed as

Page Ref:

Exam Chapter 03 pg-1

Answer Key
Testname: BUS_STATS_CH03

12) TRUE

Explanation: The coefficient of variation is computed as and is a relative measure of dispersion.

Page Ref:
13) FALSE
Explanation: Mean-variance analysis suggests that investments with lower average returns are also
associated with lower risks.
Page Ref:
14) TRUE

Explanation: The Sharpe ratio for an investment is computed as

Page Ref:
15) FALSE
Explanation: Chebyshev's theorem is valid for both sample and population data.
Page Ref:
16) TRUE
Explanation: The empirical rule can be applied to the distribution that is relatively symmetric and
bell-shaped.
Page Ref:
17) FALSE
Explanation: Z-scores can only be used to detect outliers when the data are relatively symmetric and
bell-shaped.
Page Ref:
18) FALSE
Explanation: The formula for a z-score is
Page Ref:
19) TRUE
Explanation: Outliers are extremely small or large values.
Page Ref:
20) FALSE
Explanation: The pth percentile divides the class into two parts, where approximately p percent of the
values are less than pth percentile and the rest of the grades are greater than the pth
percentile.
Page Ref:
21) FALSE
Explanation: Geometric mean is smaller than the arithmetic mean and is less sensitive to outliers.
Page Ref:
22) FALSE
Explanation: The larger the standard deviation is, the more variable the data are. Businesses prefer a
smaller standard deviation.
Page Ref:

Exam Chapter 03 pg-2

Answer Key
Testname: BUS_STATS_CH03

23) FALSE
Explanation: A z-score is a unitless measure because its numerator and the denominator have the same
units.
Page Ref:
24) FALSE
Explanation: The midpoint is the value in the middle of the class and is calculated by averaging the
endpoints of the class.
Page Ref:
25) A
Explanation: The median is the middle point in a data set; it is the 50th percentile.
Page Ref:
26) D
Explanation: The mode is the most frequently occurring value in a data set. There may be more than one
mode.
Page Ref:
27) D
Explanation: As opposed to the mode and all percentiles, the arithmetic mean is the most affected by
outliers.
Page Ref:
28) B
Explanation: If the number of observations is odd, the median is the middle value in the sorted data set.
Page Ref:
29) D
Explanation: If every value in a data set occurs only once, there is no mode.
Page Ref:
30) D
Explanation: If multiple data values occur with the same frequency (greater than one), and that frequency
is the greatest seen in the data, then the data has multiple modes.
Page Ref:
31) D
Explanation: Raising all values in the data set changes mean, median, and mode of the sample.
Page Ref:
32) A
Explanation: Raising the highest value in the data set will change only the mean of the sample.
Page Ref:
33) C
Explanation: The sample mean: The median:first arrange data in ascending order. The median is
in the middle. If there are an even number of values in the data set, take the average of two
values in the middle.
Page Ref:

Exam Chapter 03 pg-3

Answer Key
Testname: BUS_STATS_CH03

34) D
Explanation: Approximately p% of the observations are less than the pth percentile, and approximately
(100 – p)% of the observations are greater than the pth percentile.
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35) D
Explanation: The values are: Minimum, Quartile 1, Median, Quartile 3, and Maximum.
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36) A
Explanation: The interquartile range (IQR) is the difference between the third and the first quartiles.
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37) C
Explanation: First arrange the data in ascending order. Then find the approximate position of the
percentile
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38) C
Explanation: First arrange the data in ascending order. Then find the approximate position of the
percentiles

The interquartile range, IQR = L75 – L25.

Wrong answers include the median, the location of the 25th and 75th percentile, and the range.
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39) A
Explanation: First arrange the data in ascending order. Then find the approximate position of the
percentiles
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40) D
Explanation: The concept of geometric mean is used to evaluate investment returns and calculate average
growth rates.
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41) C
Explanation: The geometric mean is never greater than the arithmetic mean; it is also less sensitive to
outliers.
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42) B
Explanation: The average growth rate is defined as
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Exam Chapter 03 pg-4

Answer Key
Testname: BUS_STATS_CH03

43) C

Explanation: The average growth rate is defined as

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44) B
Explanation: The geometric mean return is defined as

Wrong answers include arithmetic mean, median, using positive values of growth rates instead of
negative ones, and not converting percentages to fractions.
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45) D
Explanation:

Wrong answers include arithmetic mean, median, and using geometric mean return over full four
years instead of 3.25 years.
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46) C
Explanation: The range of a data set is the difference between the maximum value and the minimum
value.
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47) C
Explanation: Variance and standard deviation are the most widely used measures of dispersion.
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48) D
Explanation: The standard deviation is never negative because it is the positive square root of the
non-negative variance.
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49) D

Explanation: The sample variance is computed as

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50) C
Explanation: The sample mean absolute deviation is the population mean absolute
deviation is
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51) D
Explanation: We use the coefficient of variation to measure relative dispersion. Coefficient of variation
is
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Exam Chapter 03 pg-5

Answer Key
Testname: BUS_STATS_CH03

52) C
Explanation: The population mean is computed as
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53) B
Explanation: First arrange data in an ascending order. The median is the middle value.
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54) A
Explanation: The mode is the value that appears the most.
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55) C

Explanation: The population variance is computed as

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56) A
Explanation: First, find the population variance The population standard deviation
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57) D
Explanation: For the sample mean For the median first arrange data in ascending order, then take
the value from the middle.
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58) B
Explanation: The sample variance is computed as ; The sample standard deviation is
computed as a positive square root from sample variance
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59) C
Explanation: First arrange the data in ascending order. Then find the approximate position of the
percentile
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60) B
Explanation: The interquartile range is computed as a difference L75 – L25.
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61) C
Explanation: The sample mean is computed as
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62) B
Explanation: First arrange data in ascending order. The median is the middle value. Wrong answers
include the mean, the mode, and the unsorted middle value.
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Exam Chapter 03 pg-6

Answer Key
Testname: BUS_STATS_CH03

63) A
Explanation: The modal score is the value that appears the most.
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64) B

Explanation: First, find the sample mean. Then, calculate the sample variance The sample
standard deviation
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65) C
Explanation: The sample mean and sample standard deviation should be multiplied by 1.02.
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66) B
Explanation: The sample mean is computed as
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67) A
Explanation: First, arrange data in ordered array. Then, find the middle value.
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68) B

Explanation: First, find the sample mean. Then, calculate the sample variance The sample
standard deviation
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69) A
Explanation: In some instances, analysis entails comparing two or more data sets that have different
means or units of measurement. The coefficient of variation (CV) serves as a relative
measure of dispersion and adjusts for differences in the magnitudes of the means.
Page Ref:
70) D
Explanation: Calculated by dividing a data set's standard deviation by its mean, the coefficient of
variation is a unit-free measure that allows for direct comparisons of mean-adjusted
dispersion across different data sets.
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71) A
Explanation: Calculated by dividing a data set's standard deviation by its mean, the coefficient of
variation is a unit-free measure that allows for direct comparisons of mean-adjusted
dispersion across different data sets.
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72) A
Explanation:
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Exam Chapter 03 pg-7

Answer Key
Testname: BUS_STATS_CH03

73) B
Explanation: Data are positively skewed if the skewness is positive. For positively skewed distributions
the median is likely to be less than the mean.
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74) A
Explanation: Calculated by dividing a data set's standard deviation by its mean, the coefficient of
variation is a unit-free measure that allows for direct comparisons of mean-adjusted
dispersion across different data sets.
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75) B
Explanation: First, find the sample mean. Then, calculate the sample variance (s 2). Standard deviation:

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76) B
Explanation: The sample mean Then, calculate the sample variance (s2). Standard deviation:

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77) C
Explanation: For the median arrange data in ascending order, then the median is middle value. For
sample standard deviation, first calculate the sample mean, then calculate sample variance,
and finally, the sample standard deviation.
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78) A
Explanation: The Sharpe ratio measures the extra reward per unit of risk.
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79) B
Explanation: The sample coefficient of variation CV is a relative measure of dispersion The
Sharpe ratio measures extra reward per unit of risk. The Sharpe ratio for an investment is

computed as The higher the Sharpe ratio, the better the investment compensates
its investors for risk.
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80) C
Explanation: The Sharpe ratio measures extra reward per unit of risk. The Sharpe ratio for an investment

is computed as The higher the Sharpe ratio, the better the investment
compensates its investors for risk.
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Exam Chapter 03 pg-8

Answer Key
Testname: BUS_STATS_CH03

81) A
Explanation: For any data set and k> 1, at least (1 - 1/k2)100% of observations lie within k standard
deviations from the mean.
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82) A
Explanation: There are no restrictions on the shape of a data distribution when using Chebyshev's
theorem.
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83) D
Explanation: Both provide estimates of the proportion of the data that lie within a specified number of
standard deviations from the mean.
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84) D
Explanation: Chebyshev's theorem applies to all data sets, whereas the empirical rule is only appropriate
when the data set have an approximately symmetric and bell-shaped distribution.
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85) C
Explanation: For every k> 1, Chebyshev's theorem provides a lower bound on the proportion (or
percentage) of the data that lie within k standard deviations from the mean.
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86) D
Explanation: The empirical rule is only applicable for approximately symmetric and bell-shaped data
sets.
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87) A
Explanation: When applicable, the empirical rule states that about 68% of all observations fall within one
standard deviation from the mean, about 95% of all observations fall within two standard
deviations from the mean, and almost all observations fall within three standard deviations
from the mean.
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88) B
Explanation: For a set of sample data, the empirical rule states that approximately 68% of all
observations are in the interval approximately 95% of all observations are in the
interval and almost all observations are in the interval
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89) D
Explanation: For both sample and population data, the empirical rule is applicable when the data are
approximately symmetric and bell-shaped.
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Exam Chapter 03 pg-9

Answer Key
Testname: BUS_STATS_CH03

90) B
Explanation: According to Chebyshev's theorem, for any data set, the proportion of observations that lie
within k standard deviations from the mean is at least 1 - 1 / k2. If k = 2, at least 75% of the
observations fall in the interval defined by
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91) B
Explanation: According to the empirical rule, about 68% of the observations fall in the interval defined
by
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92) C
Explanation: According to Chebyshev's theorem, at least 75% of the observations must lie within two
standard deviations of the mean Also, the proportion of the observations within k
standard deviations from the mean is at least 1 - 1 / k2.
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93) D
Explanation: According to Chebyshev's theorem, at least 75% of the observations must lie within two
standard deviations of the mean
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94) A
Explanation: Because the data are bell-shaped, we apply the empirical rule. According to the empirical
rule, approximately 95% of the observations lie within two standard deviations of the mean

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95) B
Explanation: Because the data are bell-shaped, we apply the empirical rule. According to the empirical
rule, approximately 68% of the observations lie within one standard deviation of the mean:

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96) C
Explanation: Because the data are bell-shaped, we apply the empirical rule. According to the empirical
rule, approximately 95% of the observations fall within two standard deviations of the
mean
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97) C
Explanation: The mean for a frequency distribution for grouped data is defined as
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Exam Chapter 03 pg-10

Answer Key
Testname: BUS_STATS_CH03

98) C
Explanation: Given 200 observations, the median will be between the 100 th and the 101 st observations
in the sorted data.
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99) B
Explanation: The mean for a frequency distribution for grouped data is defined as
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100) B
Explanation: Given 50 observations, the median will be between the 25 th and the 26 th observations in
the sorted data.
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101) B
Explanation: The mean for a frequency distribution for grouped data is defined as
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102) A
Explanation: The variance for a frequency distribution for grouped data is defined as
The standard deviation is defined as a square root from variance.
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103) B
Explanation: The mean for a frequency distribution for grouped data is defined as
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104) C
Explanation: The mean for a frequency distribution for grouped data is defined as
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105) B
Explanation: The mean for a frequency distribution for grouped data is defined as
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106) C
Explanation: The sample mean for a frequency distribution for grouped data is defined as
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107) B
Explanation: The sample mean for a frequency distribution for grouped data is defined as The
sample variance for a frequency distribution for grouped data is defined as
The standard deviation is defined as a square root from variance.
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Exam Chapter 03 pg-11

Answer Key
Testname: BUS_STATS_CH03

108) A
Explanation: The covariance is a numerical measure that reveals the direction of the linear relationship
between two quantitative variables.
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109) B
Explanation: A positive value of covariance indicates a positive linear relationship between x and y; on
average, if x is above (below) its mean, then y tends to be above (below) its mean, and vice
versa. A negative value of covariance indicates a negative linear relationship between x and
y; on average, if x is above (below) its mean, then y tends to be below (above) its mean, and
vice versa.
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110) D
Explanation: The correlation coefficient is preferred in evaluating the direction and strength of the linear
relationship between two variables. It is a unit-free measure, assuming the values from the
interval [–1, 1].
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111) D
Explanation: The value of the correlation coefficient falls between –1 and 1. A perfect positive
relationship exists if it equals 1, and a perfect negative relationship exists if it equals –1.
Other values for the correlation coefficient must be interpreted accordingly. For instance, a
correlation coefficient equal to –0.80 indicates a strong negative relationship, whereas a
correlation coefficient equal to 0.20 indicates a weak positive relationship. If the value of
this coefficient is very close to 0, no relationship is assumed.
Page Ref:
112) B
Explanation: The sample correlation coefficient is defined as
Page Ref:
113) C

Explanation: The sample covariance is computed as

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114) A

Explanation: The sample correlation coefficient is defined as

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115) C
Explanation: First sort data in ascending order. Because there are an even number of values, you should
average two values in the middle of the sorted list.
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Exam Chapter 03 pg-12

Answer Key
Testname: BUS_STATS_CH03

116) D
Explanation: Arrange data in ascending order. Locate the approximate position of the percentile

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117) A
Explanation: Data have to be arranged in ascending order. Define the position of the value in question.
Define the percentile from the following formula:
Page Ref:
118) B
Explanation: The interquartile range represents the middle half of the data and is defined as the
difference between the third quartile (Q3) and first quartile (Q1), or between the 75 th
percentile and 25th percentile
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119) A
Explanation: The upper limit of the box plot is defined as third quartile, or 75 th percentile.
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120) B
Explanation: The z-score measures the distance of a given sample value from the mean in standard
deviations.
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121) C
Explanation: The z-score is computed as
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122) A
Explanation: The z-score is computed as
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123) A
Explanation: For the bell-shaped and symmetrical distribution, the empirical rule dictates that
approximately 68% of all observations fall in the interval
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124) C
Explanation: For the bell-shaped and symmetrical distribution, the empirical rule dictates that almost all
observations fall in the interval
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125) C
Explanation: The empirical rule dictates that 95% of all observations fall in the interval
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Exam Chapter 03 pg-13

Answer Key
Testname: BUS_STATS_CH03

126) B
Explanation: The sample mean for a frequency distribution for grouped data is defined as
Page Ref:
127) C

Explanation: The sample covariance is computed as

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128) D

Explanation: The sample correlation coefficient is defined as

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129) Mean = 5.25, Median = 5.5, Mode = 3
The sample mean is computed as The median is the middle value of a data set. The mode is the most
frequently occurring value in a data set.
Explanation: The sample mean is computed as The median is the middle value of a data set. The
mode is the most frequently occurring value in a data set.
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130) Mean = 2.25 hours, Median = 1.5, Mode = 1.
No.
Explanation: The sample mean is computed as . The median is the middle value of a data set.
The mode is the most frequently occurring value in a data set. The main weakness of the
mean is that it is very sensitive to outliers.
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131) Mean = 5.8, Median = 5.5, Mode = 4.
Explanation: The sample mean is computed as . The median is the middle value of a data set.
The mode is the most frequently occurring value in a data set.
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132) Mean = 8.4, Median = 8.35, Mode = 7.9
Explanation: The sample mean is computed as The median is the middle value of a data set. The
mode is the most frequently occurring value in a data set.
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133) Mean = 15 TD, Median = 12. No, it is sensitive to the outlier of 28.
Explanation: The sample mean is computed as The median is the middle value of a data set. The
mode is the most frequently occurring value in a data set. The main weakness of the mean
is that it is very sensitive to outliers.
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Exam Chapter 03 pg-14

Answer Key
Testname: BUS_STATS_CH03

134) a. 25th percentile is 46; 50th percentile is 52; 75th percentile is 58.
b. Yes, 24 is an outlier; Not symmetric; Negatively skewed.
Explanation: Arrange data in ascending order. Locate the approximate position of the percentile:

Outliers are extremely small or large values. To determine if a given observation is an outlier the
interquartile range
needs to be calculated as a difference between Q3 and Q1. Values that are farther than 1.5 × IQR
from the box plot.
If there is an outlier on either side of the distribution than the distribution is not symmetric and is
skewed.
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135) a. 30th percentile is 242; 50th percentile is 280; 70th percentile is 309.
b. Yes 20 and 570 are outliers. Yes it is Symmetric.
Explanation: Arrange data in ascending order. Locate the approximate position of the percentile:

Outliers are extremely small or large values. To determine if a given observation is an outlier the
interquartile range
needs to be calculated as a difference between Q3 and Q1. Values that are farther than 1.5 × IQR
from the box plot.
If there is an outlier on either side of the distribution than the distribution is not symmetric and is
skewed.
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136) a. 1.2% b. 1.00%
Explanation: The arithmetic mean return is computed as The geometric mean return is computed
as
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137) a. For GLD: s2 = 662.92; s = 25.75. For SLV: s2 = 67.58; s = 8.22
b. GLD had a greater variance. For GLD, CV = 0.25; for SLV, CV = 0.45
c. Silver had the greater relative dispersion.

Explanation: The sample variance is computed as The sample standard deviation is

computed as
The sample coefficient of variation is computed as
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Exam Chapter 03 pg-15

Answer Key
Testname: BUS_STATS_CH03

138) a. Range = 16
b. = 10.57, MAD = 4.65
Explanation: The range is computed as the difference of maximum and minimum values in the sample.
The sample mean is computed as The mean absolute deviation is computed as

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139) a. –2.9% b. –2.9%
Explanation: The average growth rate is computed as and

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140) Option A ratio = 0.1926, Option B ratio = 0.1102, Option C ratio = 0.0861; Option A offers the best
reward per unit of risk.
Explanation: he Sharpe ratio measures extra reward per unit of risk. The Sharpe ratio for an investment is
computed as The higher the Sharpe ratio, the better the investment compensates
its investors for risk.
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141) a. For Retail ETF, the mean = 10.60%; for Energy ETF, the mean = 8.80%
b. For Retail ETF, the geometric mean return = 4.22%; for Energy ETF, the geometric mean return = 3.43%.
c. For Retail ETF, the standard deviation = 0.42; for Energy ETF, the standard deviation = 0.34. The Retail ETF is
riskier.
d. For Retail ETF, the Sharpe ratio = 0.13; for Energy ETF, the Sharpe ratio = 0.11. The Retain ETF has a
higher return per unit of risk.
Explanation: The arithmetic mean return is computed as The geometric mean return is computed
as The sample standard deviation is computed as

The Sharpe ratio measures extra reward per unit of risk. The Sharpe ratio for
an investment is computed as The higher the Sharpe ratio, the better the
investment compensates its investors for risk.
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142) a. Caterpillar has the higher average return.
b. Caterpillar has higher risk.
c. SRChevron = 0.32; SRCaterpillar = 0.45. So Caterpillar has better risk per unit of reward.
Explanation: The arithmetic average return is calculated as To estimate the higher risk standard

deviations need to be computed as The Sharpe ratio for an investment is

computed as The higher the Sharpe ratio, the better the investment compensates
its investors for risk.
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Exam Chapter 03 pg-16

Answer Key
Testname: BUS_STATS_CH03

143) a. Apple
b. Apple
c. Apple has better return per unit of risk
Explanation: The arithmetic average return is calculated as To estimate the higher risk standard
deviations need to be compared. The Sharpe ratio for an investment is computed as
The higher the Sharpe ratio, the better the investment compensates its investors
for risk.
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144) a. At least 75%
b. At least 450
Explanation: According to Chebishev's theorem, for any data set with unknown distribution, the
proportion of observations that lie within k standard deviations from the mean is at least 1 –
1 / k2.
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145) a. At least 75% of the time.
b. About 95% of the time.
Explanation: According to Chebishev's theorem, for any data set with unknown distribution, the
proportion of observations that lie within k standard deviations from the mean is at least 1 –
1 / k2. According to the empirical rule, about 95% of the observations will fall within

Page Ref:
146) a. About 95%
b. About 570
Explanation: If the distribution is assumed to be bell-shaped and symmetric, according to the empirical
rule, about 95% of the observations will fall within
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147) a. = 1,150; Median = 1,165

b. 2.5%
Explanation: The sample mean is computed as The median is the middle value of a data set.
According to the empirical rule, about 95% of the observations will fall within
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Exam Chapter 03 pg-17

Answer Key
Testname: BUS_STATS_CH03

148) a. Mean = 70. Yes, it is a good measure of central location; No outliers; Median = 69
b. Sample Standard Deviation ≈ 9
c. 75th percentile is 79
Explanation: The sample mean is computed as The median is the middle value of a data set. The

sample standard deviation is computed as To get a percentile you should

arrange data in ascending order first. To locate the approximate position of the percentile:

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149) a. The sample standard deviation for the number of visitors = 24.41; the sample standard deviation for Revenue =
2.25.
b. The coefficient of variation for the number of visitors = 0.70; the coefficient of variation for Revenue = 0.42; th
number of visitors had a higher relative dispersion.
c. The correlation coefficient between the number of visitors and Revenue = 0.089.
d. The linear relationship is weak. The number of unique visitors is not the major driver of revenue.

Explanation: The sample standard deviation is computed as The sample coefficient of

variation is computed as The sample covariance and correlation coefficient are

computed as and
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150) a. Mean GPA = 2.70.
b. Standard deviation = 0.40.
c. Almost all observations are between 1.5 and 3.9. Yes, this makes sense.
Explanation: The sample mean for a frequency distribution for grouped data is defined as:
The sample variance for a frequency distribution for grouped data is defined as:

The standard deviation is defined as a square root from variance. According the empirical rule
almost all observations fall within
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151) a. = 4.0
b. s2 = 9.18; s = 3.03
Explanation: The sample mean for a frequency distribution for grouped data is defined as:
The sample variance for a frequency distribution for grouped data is defined as:

The standard deviation is defined as a square root from variance.

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Exam Chapter 03 pg-18

Answer Key
Testname: BUS_STATS_CH03

152) a. = 9.05%
b. s = 2.60
Explanation: The sample mean for a frequency distribution for grouped data is defined as:
The sample variance for a frequency distribution for grouped data is defined as:

The standard deviation is defined as a square root from variance.

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153) a. sxy = 0.0375 b. rxy = 0.69; strong positive correlation.

Explanation: The sample covariance and correlation coefficient are computed as and

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Exam Chapter 03 pg-19