Expert Answers

Provide details if false

  1. True or false. When simple interest is used, the accumulated amount is a linear function of time.
  2. True or false. Compound interest that is converted once a year is the same as simple interest.
  3. True or false. If interest is compounded annually, then the effective rate of interest is the same as the nominal rate of interest.
  4. True or false. The present value is always smaller than the future value.
  5. True or false. The future value of an annuity can be found by adding together all the payments that are paid into an account.
  6. True or false. The periodic payment R where  and P is the loan amount and i is the interest per period that will amortize the loan at the end of the term comprising periods.
  7. True or false. A sinking fund is the accumulated amount to be realized at some future date (the end of the term) when a fixed number of periodic payments are paid into an account earning interest at the rate of i per period.
  8. What is the difference between the accumulated amount (future value) and the present value of an investment?  Give examples of each

Multiple Choice Answers

1.) The height of a continuous probability curve over a given point is equal to:
the mean
the standard deviation
2.) The mean and median are the same for a normal distribution.

3.) In a statistical study, the random variable X = 1, if the house is colonial, and X = 0 if the house is not colonial, then it can be stated that the random variable is continuous.

4.) The actual weight of hamburger patties is an example of a continuous random variable.

5.) For a continuous distribution, P(X ≤ 100) = P(X < 100).

6.) A standard normal distribution has a mean of ____ and standard deviation of ___.
zero, zero
zero, one
one, one
one, zero

7.) Which two distributions are useful in analyzing queues?
Binomial and normal
Normal and exponential
Poisson and normal
Poisson and exponential

8.) The area under the normal curve between z = 0 and z = 1 is _________ the area under the normal curve between z = 1 and z = 2.
less than
greater than
equal to
A, B, or C above depending on the value of the mean
A, B, or C above depending on the value of the standard deviation

9.) If a random variable x has a uniform distribution with a mean of 10 and the lowest value of x is 5, what is the largest value of x that can exist?

10.) The price-to-earning ratio for firms in a given industry is distributed according to a normal distribution. In this industry, a firm with a Z value equal to 1:
has an above average price-to-earning ratio.
has a below average price-to-earnings ratio.
has an average price-to-earnings ratio.
may have an above average or below average price-to-earnings ratio.

11.) A student’s grade on an examination was transformed to a z value which is negative. Therefore, we know that he scored:
higher than 16% of the class.
higher than 45% of the class.
above the first quartile.
below the mean.
above the mean but below the median.

12.) The MPG (mileage per gallon) for a mid-size car is normally distributed with a mean of 32 and a standard deviation of .8. What is the probability that the MPG for a selected mid-size car would be less than 33.2?

13.) The number of standard deviations that a value x if from the mean is:

14.) A uniform distribution has the following shape:

15.) A methodology that attempts to determine the number of servers that strikes an optimal balance between the time customers wait for service and the cost of providing service is:
Queueing theory.
Exponential theory.
Optimization theory.
Normal distribution.
Uniform distribution.

Work Shown

Whispering Pines, Inc. is all-equity-financed. The expected rate of return on the shares is 12%. What is the opportunity cost of capital for an average-risk Whispering Pines investment?

Next, suppose the company issue debt, repurchases shares, and moves to a 30% debt to value ratio (D/V=.30). What will the company’s weighted-average cost of capital be at the new capital structure? The borrowing rate is 7.5% and the tax rate is 35%.


Using quotes and sources from the following scenario, write a brief interview story. Use quotes from at least three of the five sources. Do not quote anyone who hasn’t said something relevant. Do some research to get some background on the topic (use the Internet). Include at least a sentence of background in the story. Do not report anything that is not true, even if the source told it to you. Do not report anything you do not understand. Do some research. Then write a short story using a single-sentence news lead and inverted pyramid style. (Don’t worry how long the story is; this is a practice exercise.) Scenario: You have interviewed five University College students at the Center of Adult Education, which for the purposes of this Try It we will assume is located in your home town. Your assignment was to find out how University College students feel about penalties for texting while driving. (Your lead should not announce that such a law exists in your home state. That’s yesterday’s news. Your story is about reaction to the idea of penalties for texting while driving — and if your state does not yet have such a law, reaction to the possibility it will/has been proposed or it will beimposed. Your lead should summarize what your sources said–specifically, what the prevailing opinion among your sources is. You should include a sentence or two of background about the status of such a law in your home state.)