@markmeldrum
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Up5
The correct answer is Option C.
A hypothesis is defined as a statement about the value of some effect size or parameter one or more populations.
To test a hypothesis, one of the steps would be to identify an appropriate test statistic and its probability distribution (Option B is incorrect).
The field of statistical inference has two subdivisions: estimation and hypothesis testing. Estimation focuses on the likely value of a given parameter (Option A is incorrect).
Up5The correct answer is Option B.
Up5The correct answer is Option A.
Both Option B and Option C result in Asset BPV derived from government bonds. Movements in the corporate – Treasury yield spread introduce risk to the hedging strategy. Usually, yields on high-quality corporate bonds are less volatile than on more-liquid Treasuries.
For Option A, the spread risk is between high-quality corporate bond yields (the pension liabilities) and swap rates. Typically, there is less volatility in the corporate/swap spread than in the corporate/Treasury spread because both Libor and corporate bond yields contain credit risk vis-à-vis Treasuries.
Up5The correct answer is Option A.
Derivatives are created in the form of legal contracts. Also, the most common definition of a derivative is that they are “financial instruments that derive their value from the performance of an underlying asset.”
Up4The correct answer is B:
Conservatism bias is a belief perseverance bias, in which people maintain their prior views or forecasts by inadequately incorporating new information.
Confirmation bias is a belief perseverance bias, in which people tend to look for and notice what confirms their beliefs and to ignore or undervalue what contradicts their beliefs.
Representativeness bias is a belief perseverance bias, in which people tend to classify new information based on past experiences and classifications.
Up4The correct answer is Option A:
Whereas the significance level of a test is the probability of incorrectly rejecting the null, the power of a test is the probability of correctly rejecting the null, that is, the probability of rejecting the null when it is false.
Up4The correct answer is Option A:
The Standard prohibits offering, soliciting, or accepting gifts that reasonably could be expected to compromise their own or another’s independence and objectivity.
Lawrence violated the Standard by accepting a lavish gift, and Karu violated the Standard by offering a lavish gift.
Note that both have violated the Standard even though Lawrence ultimately chooses not to hire Karu.
Up4The correct answer is Option B.
All currency quotes are given as price/base. At the beginning of the month, one USD bought 1.2563 CAD. At the end of the month, 1 USD bought 1.2493 CAD. Over the month 1 USD bought fewer CAD indicating that the USD weakened against the CAD.
Up4The correct answer is Option C.
During periods of market stress, investors may exhibit a “flight to quality” by buying safer assets such as government bonds (increasing their prices) and selling riskier assets such as equity securities and high-yield bonds (lowering their prices). These actions may decrease the correlation between government bonds and equity securities, as well as between government bonds and high-yield bonds. At the same time, the correlation between riskier assets such as equity securities and high-yield bonds may increase.
Up4The correct answer is Option B.
Under an independently floating rate regime, the exchange rate is left to market determination and the monetary authority is able to exercise independent monetary policy aimed at achieving such objectives as price stability and full employment. The central bank also has the latitude to act as a lender of last resort to troubled financial institutions, if necessary.
Up3The correct answer is Option A.
With a hindsight bias, people may see past events as having been predictable and reasonable to expect.
With a confirmation bias, people generally place excessive weight on confirmatory information; that is, they place greater weight on information that supports their beliefs.
Conservatism bias is a belief perseverance bias, in which people maintain their prior views or forecasts by inadequately incorporating new information.
Up3The correct answer is Option C.
Primary dealers are dealers with whom central banks trade when conducting monetary policy.
Option A refers to broker-dealers and Option B refers to market-makers.
Up3The correct answer is Option B.
Since the purchase of the stock was a mistake, Santa Ana has not violated Standard III(C) Suitability.
Since he corrected the error immediately upon recognizing it, reimbursed the account for the loss and the trading fees, and immediately informed the client of the error, he has not violated Standard I (D).
Up3The correct answer is Option B.
The probability of a Type I error in testing a hypothesis is denoted by the Greek letter alpha, α.
The probability of a Type 2 error in testing a hypothesis is denoted by the Greek letter beta, β.
Option Β is difficult to quantify and it does not = 1 – α.
Finally, with respect to Option C, the only way to reduce the probabilities of both types of errors simultaneously is to increase the sample size, n.
Up3The correct answer is Option A.
If Linstrom makes the statement that the amount is about 90% when he knows it to be 65% – especially with the intent to increase donations of money – his statement if fraudulent, and may well be illegal. Such actions compromise his integrity, which is a violation of Standard I(D).
Note that the fraud does not have to be related to his profession.
Up2Option A is incorrectly stated since the appropriate formulation should be: H0: θ ≤ θ0 versus Ha: θ >θ0.
We state the null and alternative hypotheses such that they account for all possible values of the parameter.
Option A does not account for the condition that θ = θ0.
Up2The correct answer is Option C:
The employees at GIA are not responsible for detailed knowledge of applicable laws; that responsibility lies with the compliance department and GIA’s legal counsel.
Faider’s summary, which highlights how the changes will affect GIA’s employees, complies with Standard I(A).
Standard IV(C) is not applicable as Faider’s actions do not fall under supervisors’ responsibilities.
Up2The correct answer is Option A.
Bonds that pay no coupon prior to maturity are called zero-coupon bonds or pure discount bonds. These bonds are sold at a discount to their par value and the entire discount is considered interest, which, while earned each year, is all paid at maturity when the bondholder receives the par value.
Up2The correct answer is Option C.
Standard III(A) requires Stefan to seek the best execution for each client. For some clients, the explicit cost of the trade – the fees charged – is more important than the speed at which the trade is executed. For other clients, the speed at which the trade is executed is more important than the explicit cost of the trade. Best execution means getting the most appropriate combination of cost and speed for each transaction for each client.
Up2The correct answer is Option C.
The real exchange rate can be approximated by:
%ΔSd/f + CPIf – CPId or by %ΔSP/B + CPIP – CPIB
The change in the real exchange rate would then be approximately 9% + 1.88% – 1.02% ≈ 9.86%.
