Use the Information for the Question(s)below

question 15

Multiple Choice

Use the information for the question(s) below.
Consider an economy with two types of firms: S and U. The S firms always move together, but U firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-The standard deviation for the return on an individual firm is closest to:

• A)15.0%
• B)10.0%
• C)23.0%
• D)5.25%

---

Definitions:

Chi-Square

A statistical test used to determine if there is a significant difference between the expected frequencies and the observed frequencies in one or more categories.

Goodness-Of-Fit Test

A statistical test used to see how well sample data fit a distribution from a population with a normal distribution.

Lower-Tail Test

A statistical test used to determine if a data sample is significantly lower than the population mean.

Upper-Tail Test

Is a statistical test where the critical area, where we reject the null hypothesis, is located in the upper tail of the distribution.