Describe the Runs Test for Randomness

question 47

Essay

Describe the runs test for randomness. What types of hypotheses is it used to test? Does the runs test measure frequency? What is the underlying concept?

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Definitions:

360-Day Year

A simplified method of calculating interest for commercial loans or bonds that assumes each month has 30 days, resulting in a 360-day year.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage over a period of time.

Principal

The original sum of money borrowed in a loan, or the amount of the investment on which interest is calculated.

Promissory Note

A Promissory Note is a financial document in which one party promises to pay a specified sum of money to another party at a predetermined date or on demand.