Category Archives: Minitest

Cheryl Smith, CFA, is comparing dividend changes for energy and non-energy companies. Smith determines that 15% of the stock market universe consists of energy companies. Smith also determines that the probability that an energy company will increase its dividend is 90% and the probability that a non-energy company will increase its dividend is 30%. IfContinue reading “Mini test #5”

The probability that the economy will enter a recession after the Federal Reserve increases the federal funds target rate is 60%, and the probability that the economy will enter a recession if the Federal Reserve does not increase the federal funds target rate is 10%. The unconditional probability that the economy will fall into recessionContinue reading “Minitest #4”

Analyst Shelly King is using a returns and earnings database to examine the past performance of stocks. King sorts stocks from high to low P/E ratio by dividing the beginning of the year stock price by the reported year-end earnings per share recorded in the database for the prior year. King then creates portfolios ofContinue reading “Mini test #3”

Alice Morton, CFA, is reviewing a research paper that reaches a conclusion based on two hypothesis tests with p-values of 0.037 and 0.064. Morton should conclude that: A) both of these tests’ null hypotheses can be rejected with 90% confidence. B) neither of these tests’ null hypotheses can be rejected with 95% confidence. C) onlyContinue reading “Mini test #1”

Given the information in the table for Portfolios A, B, and C, and a target return of 3%, which portfolio has the lowest shortfall risk? A) Portfolio A. B) Portfolio B. C) Portfolio C. ExplanationThe portfolio with the lowest probability of returns less than 3%, is the one with the highest safety-first ratio. Safety-first ratioContinue reading “Mini test #2”