DATA ANALYTICS FOR ACCOUNTING W/CONNECT
1st Edition
ISBN: 9781260574449
Author: RICHARDSON
Publisher: MCG
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Chapter 4, Problem 2MCQ
In the late 1960s, Ed Altman developed a model to predict if a company was at severe risk of going bankrupt. He called his statistic Altman’s Z-score, now a widely used score in finance. Based on the name of the statistic, which statistical distribution would you guess this came from?
- a.
Normal distribution - b. Poisson distribution
- c. Standardized normal distribution
- d. Uniform distribution
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You analyzed the returns of a sample of stocks. You found that, on average, the firms with high E/P ratios have higher subsequent returns. (i) Discuss an explanation for this pattern that is consistent with the EMH. (ii) Discuss an explanation that is not consistent with the EMH. (A couple sentences per part.)
Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period,
long-term corporate bonds had an average return of 6.5 percent and a standard deviation of 8.5 percent. For the same
period, T-bills had an average return of 3.3 percent and a standard deviation of 3.1 percent. Use the NORMDIST function in
Excel to answer the following questions:
a. What is the probability that in any given year, the return on long-term corporate bonds will be greater than 10
percent? Less than 0 percent?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
b. What is the probability that in any given year, the return on T-bills will be greater than 10 percent? Less than 0
percent?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
c. In 1979, the return on long-term corporate bonds was -4.18 percent. How…
Risk means, in today's language, the probability of something bad happening or an unfortunate outcome. Risk in finance, however, is defined as the variance of the probability distribution of returns.
a.) Why do these definitions seem contradictory?
b.) Reconcile the two ideas.
Chapter 4 Solutions
DATA ANALYTICS FOR ACCOUNTING W/CONNECT
Ch. 4 - Prob. 1MCQCh. 4 - In the late 1960s, Ed Altman developed a model to...Ch. 4 - Justin Zobel suggests that revising your writing...Ch. 4 - Prob. 4MCQCh. 4 - The Fahrenheit scale of temperature measurement...Ch. 4 - _______ data would be considered the least...Ch. 4 - ________ data would be considered the most...Ch. 4 - Prob. 8MCQCh. 4 - Exhibit 4-8 gives chart suggestions for what data...Ch. 4 - Prob. 10MCQ
Ch. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Based on the data from datavizcatalogue.com, how...Ch. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - According to Exhibit 4-8, which is the best chart...Ch. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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