Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are well-suited to online simulation.
Questions:
405.1. An industry sector contains 300 public firms where the mean earnings are $2.50 million with a standard deviation of $400,000. If the profit at exactly 10% of the firms exceeds a certain level, which is nearest to this profit level? Please use this Z lookup table if necessary: https://learn.bionicturtle.com/images/2014/dailypq/405_1_zlookup.png
a. $2,900,000
b. $3,012,000
c. $4,167,000
d. $5,558,000
405.2. A risk manager is examining a traders profit and loss (P&L) record for the last week. He observes the following outcomes for the five weekdays: +20, +40, -10, +30, and +15 (all USD in millions). The profit and losses are normally distributed with a mean of $19.0 million; i.e., the sample mean matches the population mean by coincidence. Which is nearest to the probability that this trader will record a profit of at least $37.0 million on the first trading day of next week? Please use this lookup table if necessary: https://learn.bionicturtle.com/images/2014/dailypq/405_2_tlookup.png (This question is a variation on GARP's 2014 Practice Exam Question P1.12).
a. 0.4%
b. 2.3%
c. 5.0%
d. 10.0%
405.3. A risk manager is aware that a manufacturing process at his firm produces a defects in 1.0% of components; for example, for every 100 components, the process produces one defect. The next batch will produce 200 components. The risk manager is in a real hurry and does not have his computer with him. Consequently, he wants to use the Poisson distribution, which is quicker, to approximate the binomial distribution (which he believes to be correct, given each component outcome is a Bernoulli and the outcomes are i.i.d.). He wants to estimate the probability that exactly five (5) components, among the run of 200, will be defective. Which is the probability given by the Poisson distribution, and is it a reasonable approximation to the binomial; i.e., is it within 20 basis points?
a. 2.850% which is a not a reasonable approximation (> 20 bps)
b. 3.609% which is a reasonable approximation (+/- 20 bps)
c. 4.435% which is a reasonable approximation (+/- 20 bps)
d. 5.000% which is a reasonable approximation (+/- 20 bps)
Answers here:
Questions:
405.1. An industry sector contains 300 public firms where the mean earnings are $2.50 million with a standard deviation of $400,000. If the profit at exactly 10% of the firms exceeds a certain level, which is nearest to this profit level? Please use this Z lookup table if necessary: https://learn.bionicturtle.com/images/2014/dailypq/405_1_zlookup.png
a. $2,900,000
b. $3,012,000
c. $4,167,000
d. $5,558,000
405.2. A risk manager is examining a traders profit and loss (P&L) record for the last week. He observes the following outcomes for the five weekdays: +20, +40, -10, +30, and +15 (all USD in millions). The profit and losses are normally distributed with a mean of $19.0 million; i.e., the sample mean matches the population mean by coincidence. Which is nearest to the probability that this trader will record a profit of at least $37.0 million on the first trading day of next week? Please use this lookup table if necessary: https://learn.bionicturtle.com/images/2014/dailypq/405_2_tlookup.png (This question is a variation on GARP's 2014 Practice Exam Question P1.12).
a. 0.4%
b. 2.3%
c. 5.0%
d. 10.0%
405.3. A risk manager is aware that a manufacturing process at his firm produces a defects in 1.0% of components; for example, for every 100 components, the process produces one defect. The next batch will produce 200 components. The risk manager is in a real hurry and does not have his computer with him. Consequently, he wants to use the Poisson distribution, which is quicker, to approximate the binomial distribution (which he believes to be correct, given each component outcome is a Bernoulli and the outcomes are i.i.d.). He wants to estimate the probability that exactly five (5) components, among the run of 200, will be defective. Which is the probability given by the Poisson distribution, and is it a reasonable approximation to the binomial; i.e., is it within 20 basis points?
a. 2.850% which is a not a reasonable approximation (> 20 bps)
b. 3.609% which is a reasonable approximation (+/- 20 bps)
c. 4.435% which is a reasonable approximation (+/- 20 bps)
d. 5.000% which is a reasonable approximation (+/- 20 bps)
Answers here:
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