Consider the three stocks in the following table. P(t) represents price at time t, and Q (t) represents share outstanding at time t. Stock C splits two for one in the last period.

1. First, calculate the price weighted indexes at t=0 and t=1. Based on the two numbers calculate the rate of return.

2. What must happen to the divisor for the price-weighted index in year 2?

3. Calculate the price weighted index at t=2. Based on the index number at t=1 and t=2, calculate the rate of return.

1.Match the synonyms.

-leverage     

-cost of capital

-expected return

-intrinsic value

-No Arbitrage  

-arbitrage profit  

-NPV of future investments

synonym bank: required return            debt            fundamental value            free lunch            growth options            expected holding period return (HPR)            Law of One Price      

2.The difference between the expected return and the cost of capital for a stock is called (one word)

3.A stock with a negative alpha is ?

4.A firm has 5 million shares outstanding, trading at $20 per share, and $30 million in debt. The market capitalization is:

5.The market value of a company is always equal to the market value of the assets in place.(T/F)

6.A market in which stock prices reflect all available information is called a(n)_________ capital market.

7.we learn several equivalent statements that describe a well-functioning capital market:

a. The current market price of any security is equal to the (two words) _______ ________ .

b. The alpha of any security is (one word or number) _________ .

c. The NPV of investing on the capital market is (one word or number)__________ .

d. The expected return on any security is equal to the (three words at most)______ ______ _______ .

The State of Florida is considering raising the fine for red light violations this session. The theory, of course, is that higher fines deter violations. You decide to test this by taking a sample of ten states and record their 2003 state fine for running a red light and the number of cited violations per 1,000 vehicle miles (standard measure in transportation to control for highway volume). Assume enforcement is relatively equal across the states:

State Fine                                                        Violations Measure

                                      50                                                                              10

                                    100                                                                                8

                                    120                                                                                9

                                      40                                                                                7

                                      80                                                                              10

                                      60                                                                              12

                                      90                                                                                7

                                    100                                                                                8

                                      50                                                                                9

                                    110                                                                                2                    

1.State your null formally and in lay terms for a simple regression

2. Calculate r and the regression line (y = a + bx) and reject/accept at a=.05.

3. Explain your findings in lay terms using b (if relevant), r, r-square, and p-value.

4.Calculate a 95% confidence interval for the slope and explain in layterms.

5. Calculate a 95% confidence interval for Y when X is 80, explain in layterms.

A teacher is trying to assign grades so that she has the following distribution:

This is what she actually has in her grade book:

At a significance level of 0.05, are these two distributions different? Include either χ2 or the p-value to justify your answer.

5. Penn State University wants to determine if students are satisfied with the dorm conditions. A researchers takes random samples of 25 students from each year and the students are asked whether or not they are satisfied with the dorm conditions. The results of the study are given below:

Is there sufficient evidence of a difference in dorm room satisfaction among the various year levels?

6. When analyzing survey results from a two way table, the main distinction between a test of independence and a test for homogeneity is:

7. A controversial issue in the sport of professional soccer is the use of instant replay for making difficult goal line devisions. Each person in a representative sample of 102 players, fans, coaches, and officials was asked his or her opinion about the use of instant replay for goal line decisions. The data are summarized in the two way frequency table below.

In testing to see whether opinion with respect to the use of instant replay is independent of the category of the person interviewed, a chi square test statistic of 27.99 and a p value less than 0.001 were calculated which of the following statements is correct?

8.

A controversial issue in the sport of professional soccer is the use of instant replay for making difficult goal line devisions. Each person in a representative sample of 102 players, fans, coaches, and officials was asked his or her opinion about the use of instant replay for goal line decisions. The data are summarized in the two way frequency table below.

In testing to see whether opinion with respect to the use of instant replay is independent of the category of the person interviewed, a table of respective frequencies is found. In this table the expected number of professional baseball players opposing the use of instant replay is equal to:

9. A study was performed to examine personal goals of children in grades 4, 5, and 6. A random sample of students was selected in Virginia. The students received a personal questionaire regarding achieveing personal goals. They were asked what they most like to do at school: make good grades, be good at sports, or be popular. The results are presented in the table below by sex of the child.

What type of test is appropriate for this situation?

10.

Recent revenue shortfalls in a midwestern state led to a reduction in the state budget for higher education. To offset the reduction, the largest state university proposed a 25% tuition increase. It was determined that such an increase was needed simply to compenstate for the lost support from the state. Separate random samples of 50 freshmen, 50 sophomores, 50 juniors, and 50 seniors from the university were asked whether they were strongly opposed to the increase, given that it was the minimum increase necessary to maintain the university's budget at current levels. Here are the results.  

Which hypothesis would be appropriate for performing a chi square test?

Develop estimated regression equations, first using annual income as the independent variable and then using household size as the independent variable. Which variable is the better predictor of annual credit card charges? Discuss your findings -

Develop estimated regression equations, first using annual income as the independent variable and then using household size as the independent variable. Which variable is the better predictor of annual credit card charges? Discuss your findings -

Develop an estimated regression equation with annual income and household size as the independent variables. Discuss your findings -

What is the predicted annual credit card charge for a three-person household with an annual income of $40,000 (show your work) -

The following data set shows the number of chirps in one minute from a cricket and the temperature outside (in degrees Fahrenheit):

What is the rank correlation coefficient?  (Round to three decimal places.)

What is the critical rho value at a 0.01 significance?

Do we have correlation?

• No, the rank correlation coefficient is larger (in absolute value) than the critical rho value.
• No, the rank correlation coefficient is smaller (in absolute value) than the critical rho value.
• Yes, the rank correlation coefficient is smaller (in absolute value) than the critical rho value.
• Yes, the rank correlation coefficient is larger (in absolute value) than the critical rho value.