Why Are T Statistics More Variable Than Z-Scores

question 29

Multiple Choice

Why are t statistics more variable than z-scores?

• A)The extra variability is caused by variations in the sample mean.
• B)The extra variability is caused by variations in the sample variance.
• C)The extra variability is caused by variations in the df value.
• D)None of the other options explains the extra variability for t statistics.

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Definitions:

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its shareholders or debtholders.

Future Inflation

Anticipated increase in the price level of goods and services in the future, affecting purchasing power.

Market Risk Premium

The additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often based on the risk of investing in that company's equity.