Consider an Economy with Two Types of Firms, S and I

question 61

Multiple Choice

Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a 40% probability that the firm will have a 20% return and a 60% probability that the firm will have a -30% return. The standard deviation for the return on an individual firm is closest to ________.

• A) 24.49%
• B) -10.00%
• C) 12.25%
• D) 9.80%

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Definitions:

Stepwise Regression Analysis

A method of fitting regression models where the choice of predictive variables is carried out by an automatic procedure.

Independent Variables

Variables in an experiment or model that are manipulated or categorized to observe their effect on the dependent variable, without being affected by any other variable in the experiment.

Statistical Packages

Software specifically designed for performing statistical analysis.

Stepwise Regression

An approach to regression analysis where the selection of variables for prediction is done automatically.