Data Analytics For Accounting
19th Edition
ISBN: 9781260375190
Author: RICHARDSON, Vernon J., Teeter, Ryan, Terrell, Katie
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 2MCQ
In the late 1960s, Ed Altman developed a model to predict if a company was at severe risk of going bankrupt. He called his statistic Altman’s Z-score, now a widely used score in finance. Based on the name of the statistic, which statistical distribution would you guess this came from?
- a.
Normal distribution - b. Poisson distribution
- c. Standardized normal distribution
- d. Uniform distribution
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In historical data, we see that investments with the highest average annual returns also tend to have the highest standard deviations of annual returns. This observation supports the notion that there is a positive correlation between risk and return. Which of the following answers correctly ranks investments from highest to lowest risk (and return), where the security with the highest risk is shown first, the one with the lowest risk last?
a. Large-company stocks, small-company stocks, long-term corporate bonds, U.S. Treasury bills, long-term government bonds.
b. Small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury bills.
c. U.S. Treasury bills, long-term government bonds, long-term corporate bonds, small-company stocks, large-company stocks.
d. Large-company stocks, small-company stocks, long-term corporate bonds, long-term government bonds, U.S. Treasury bills.
e. Small-company stocks, long-term corporate bonds,…
You determined that the returns from Grain Processing Inc (GPI) are normally distributed with a mean of 10% and standard deviation of 8%. In addition, you are confident that past returns are good indicators of future returns. If you buy shares in GPI. answer in Finance terms, not Satistics.
a) What is the probability that your return will be negative?
b) What is the probability that your return will be above 16%?
Which of the following statements is CORRECT?
a. The SML shows the relationship between companies' required returns and their diversifiable risks. The slope and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by its managers.
b. Suppose you plotted the returns of a given stock against those of the market, and you found that the slope of the regression line was negative. The CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor, assuming investors expect the observed relationship to continue on into the future.
c. If investors become less risk averse, the slope of the Security Market Line will increase.
d. If a company increases its use of debt, this is likely to cause the slope of its SML to increase, indicating a higher required return on the stock.
e. The slope of the SML is determined by the value of beta.
Chapter 4 Solutions
Data Analytics For Accounting
Ch. 4 - Prob. 1MCQCh. 4 - In the late 1960s, Ed Altman developed a model to...Ch. 4 - Justin Zobel suggests that revising your writing...Ch. 4 - Prob. 4MCQCh. 4 - The Fahrenheit scale of temperature measurement...Ch. 4 - _______ data would be considered the least...Ch. 4 - ________ data would be considered the most...Ch. 4 - Prob. 8MCQCh. 4 - Exhibit 4-8 gives chart suggestions for what data...Ch. 4 - Prob. 10MCQ
Ch. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Based on the data from datavizcatalogue.com, how...Ch. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - According to Exhibit 4-8, which is the best chart...Ch. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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