Suppose Psychologists Find That Redheaded People Get a Lower Mean

question 38

Multiple Choice

Suppose psychologists find that redheaded people get a lower mean score on some IQ test than do other people. What can we conclude about the possible bias of this test, or what additional information would we need before drawing a conclusion?

• A) We can conclude that the test is biased against redheads.
• B) We can conclude that the test is not biased against redheads.
• C) We cannot draw any conclusion yet. To determine whether the test is biased, we need to determine whether redheaded people do better in school than their test scores predict.
• D) We cannot draw any conclusion yet. To determine whether the test is biased, we need to determine whether redheaded people think the test is unfair.

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Definitions:

Yield-to-Maturity

The total return anticipated on a bond if the bond is held until it matures, considering all interest payments made over the life of the bond and the difference between the purchase price and the maturity value.

Marginal Tax Rate

The rate at which your last dollar of income is taxed, effectively the rate applied to each additional dollar of taxable income.

After-Tax Cost of Debt

The net cost of debt after taking into account the tax deductions available on interest payments.

Yield-to-Maturity

The total return expected on a bond if held until its maturity date, accounting for its current market price, face value, interest rate, and time to maturity.