You Are Constructing a Scatter Plot of Excess Returns for Stock

question 34

Multiple Choice

You are constructing a scatter plot of excess returns for stock A versus the market index. If the correlation coefficient between stock A and the index is -1, you will find that the points of the scatter diagram ________ and the line of best fit has a ________.

• A) all fall on the line of best fit; positive slope
• B) all fall on the line of best fit; negative slope
• C) are widely scattered around the line; positive slope
• D) are widely scattered around the line; negative slope

Calculate probabilities in the context of the Normal distribution model and understand the impact of changing standard deviations.

Grasp the concept of the sampling distribution model for different population distributions.

Understand the criteria (success/failure condition and independence) for applying the Normal model to proportions.

Conceptualize how the mean and standard deviation of a population influence probabilities and decisions in real-life contexts.