"Babe Ruth Would Have Hit 1,051 Home Runs If He

question 28

Multiple Choice

"Babe Ruth would have hit 1,051 home runs if he had the same number of at-bats as Hank Aaron. Aaron hit 41 more homers than Ruth, but Ruth only had 8,399 at-bats, whereas Aaron had 12,364 at bats." The most serious flaw with this statistic is:

• A) Ruth was also an excellent pitcher
• B) They used differently-sized bats
• C) The margin of error isn't stated
• D) It is based on an erroneous extrapolation
• E) Hank Aaron had to deal with racial prejudice, too

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Definitions:

Compounding

Compounding in finance refers to the process where an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

Compound Interest

Interest calculation that encompasses both the initial principal and the cumulative interest that has accrued in preceding periods on a deposit or loan.

Simple Interest

A way of calculating interest where the interest charge is based on the original principal amount alone.

Compounded Annually

A method of calculating interest where the interest amount is added to the principal sum at the end of each year, affecting the total interest for the next year.