In Order to Use the T-Statistic for Hypothesis Testing and Constructing

question 28

Multiple Choice

In order to use the t-statistic for hypothesis testing and constructing a 95% confidence interval as 1.96 standard errors,the following three assumptions have to hold:

• A)the conditional mean of ui,given Xi is zero; (Xi,Yi),i = 1,2,…,n are i.i.d.draws from their joint distribution;Xi and ui have four moments
• B)the conditional mean of ui,given Xi is zero; (Xi,Yi),i = 1,2,…,n are i.i.d.draws from their joint distribution;homoskedasticity
• C)the conditional mean of ui,given Xi is zero; (Xi,Yi),i = 1,2,…,n are i.i.d.draws from their joint distribution;the conditional distribution of ui given Xi is normal
• D)none of the above

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Definitions:

Accounts Payable

The amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Return On Assets

A financial ratio indicating how profitable a company is relative to its total assets, measuring efficiency in using assets to generate earnings.

Earnings Before Interest And Taxes

A financial metric indicating the profitability of a business before accounting for interest and tax expenses.

Excess Capacity

The situation in which a facility or operation can produce more than is being demanded by its customers.