R9 Common Probability Distributions

1. Determine the variance of a discrete uniform distribution,

which is defined as X={2,4,6,8,10}.

6.

8.

2.8.

2. Which of the following statments about  random variable  is

least likely correct?

The number of books a student owns is a discrete random

variable.

The temperature of Shanghai is a discrete random variable.

The number of sunny days next year in Shanghai is a discrete

random variable.
3. Which of the following statements is the most correct?

If X is a continuous random variable, P(X) can be 0.1 for value

of X.

If X is a continuous random variable, P(X)=0 for any value of X.

If X is a continuous random variable, the probability of X is not

sure.

4. A discrete random variable X follows the probability

distribution in the table below:

Accoring to the above table, P (X=4) is equal to ?

0.15.

0.17.

C
0.86.

5.

Accoring to the above table, F(4) is equal to :

0.17.

0.67.

0.84.

6.

Accoring to the above table，P( X≥6) is equal to:

0.16.

0.1.
C

0.9.

7.

Accoring to the above table ，P(3≤X≤6) is equal to:

0.23.

0.26.

0.51.

8.

Which of the following statements is the most correct?

The expected value of X is 2.87.

B
The expected value of X is 3.74.

The expected value of X is 8.23.

9.

Which of the following statements about a probability

distribution is  least likely correct?

X= [3,4,5]; Prob [Xi]= Xi2/50

X= [4,11]; Prob [Xi] =(9-Xi)/4

X= [4,8]; Prob [Xi] = (Xi-1)/10

10. Which of the following statements about the binomial

experiment is least likely correct?

The trials of a binomial experiment are not independent.

The trials of a binomial experiment are independent.

The random varible of binomial experiment is discrete

11. According to the research, 65% of all companies have a

scanner.  Assuming we selected 8 companis, what is the

probability that  five companies would have a scanner ?

0.138.

0.311.

0.279.

12. We expect that 15% of high school students will join in the

work next year. Assuming we select 5  high school students

randomly ,the probability that exactly two of them will join in

the work next year is equal to:

0.138.

0.114.

0.185.
13. It is supposed that 45% of candidates who will take the

college entrance examination has anxiety neurosis. Assuming

we selection20 candidates will take the college entrance

examination, how many candidates could have anxiety

neurosis?

14. The z-value of standard normal distribution are used to

measure the distance between the mean and any other point,

this distance is measured in unit of:

mode.

standard deviation.

C
variance.
15.

Considering the standard normal distribution, F(0) is equal to:

0.0.

0.25.

0.5.

16.

Considering Z refers an random varible of the standard normal

distribution, P(0≤Z≤1.65) is equal to ?

0.47.

0.46.

0.45.

17. A fund manager finds that the return of funds in the

market  are normally distributed having  a mean of $160,000

and a standard deviation of $30,000. What is the percent of

return that are less than $100,000 ?

0.05%.

0.13%.

2.28%.

18. A fund manager finds that the return of funds in the

market are normally distributed having a mean of $170,000

and a standard deviation of $25,000. The percent of stock

incomes greater than $245,000 is closest to:

0.50%.

2.28%.

0.13%.

19.
A fund manager finds that the return of funds in the market 

are normally distributed having  a mean of $160,000 and a

standard deviation of $30,000. The percent of stock investors

that have incomes greater than $100,000?

34.13%.

68.26%.

97.72%.

20.

According to Roy's safety-first criterion, which portfolio is the

optimal one, assuming a 5% threshold level's return?

Portfolio B.

Portfolio A.
C

Portfolio C.

21.

According to Roy's safety-first criterion, which portfolio is the

optimal one, assuming a 0% threshold level's return?

Portfolio A.

Portfolio B.

Portfolio C.

22.

An investor purchase  a stock's which initial price is $20 and its

year-end price is $25, what is its continuously compounded

annual rate of return,assuming the investor sell the stock at

the end of the year?

A
16.64%.

22.31%.

18.00%.

23.

Which of the following statements most accurately describe a

lognormal distribution?

The mean of lognormal distribution equals the mode of

lognormal distribution.

The Lognormal distribution's outcome can not be less than

zero.

Lognormal distribution's probability of a positive value is less

than 30%.

24.

There are many methods to describe the traits of asset's

returns. Which of the following analysis method  that use a

random number generator and hypothesized parameter's

values  :

Analysis that use historical data.

Monte Carlo simulation.

Hypothesis testing.

25.

A continuous uniform distribution is sopposed to be U(5, 15).

The F(18) is:

50%.

80%.

100%.

26.

Following descriptions are regard to the binomial distribution,

which one is most correct?

A

When we compute probabilities, the permutation formula is

used.

The probability of zero in the binomial distribution may not be

zero.

It is a continuous probability distribution.

27.

Datas are subject to a normal distribution , 99.7% of all datas

lies in the interval:

μ±2σ

μ±3σ

μ±σ

28. For a normally distributed random variable, the probability

that random varible is greater than three standard deviations

excess the mean is:

A

0.0013.

0.0228.

0.9987.

30. The stock price of H Company increased 2.5 times to the

initial price last year. During that period, the continuously

compounded return of H company's stock price was closest to:

22.3%.

91.63%

90.0%.

30. If a Portfolio's SFR is 1.4 and  threshold level's return is 

supposed to be 2%, what is the probability of return less than

2%?

8.08%.
B

30.20%.

9.68%.
31.

An analyst gathered the following information:

If the analyst want to minimize the probability of return less

than 3%, which portfolio has the best risk adjusted

performance according to Safety-first criterion ?

Portfolio 1.

Portfolio 2.

Portfolios 3.
32. Which of the following statements about the continuous

uniform distribution and the normal distribution is most

accurate?

If X~N(μ,σ), then X/σ~N(0,1)

The cumulative distribution function of the continuous

uniform distribution is a curve.

If X is a random variable which is continuously uniform

distributed, then P(X=a)=0 (a is a specific value).

33. If there is a distribution X which meets the condition that

ln(X) is a normal distribution, which of the following statement

is most accurate?

X is a positively skewed distribution.

X is a negatively skewed distribution.

 X is the binomial distribution .

34. Tim has an investment portfolio of $500,000 at the

beginning of 2016. At the end of that year, Tim wants to

withdraw $15,000 for daily expenses but maintain the original

value of the portfolio. Assume that return of the portfolio is

5% and normally distributed, risk-free rate is 2%  and standard

deviation of the return is 16%. The Sharpe ratio and Safety-

first ratio are:

Sharpe ratio: 12.5%, Safety-first ratio:18.75%

Sharpe ratio: 18.75%, Safety-first ratio: 31.25%

Sharpe ratio: 18.75%, Safety-first ratio: 12.5%

35. Tim, an analyst of an investment company, says " Normal

distribution is widely used in quantitative analysis. For

example, it can illustrate the distribution of assets returns and

asset prices." Is Tim correct?

Incorrect about illustrate the distribution of asset prices.

B
Incorrect about illustrate the distribution of assets returns.

Correct.

36. Given that x  is a discrete random variable,

the correspondingcumulative probability function is F(x), which

of the following is least correct？

0 ≤ F(x) ≤ 1

∑F(x)=1

F(x)=P(X≤ x)

37. Given a certain binomial random variable x, the number of

total trials is 10. If the probability of x successes in 10 trials is

all 0.5, the binomial distribution is most likely to be:

asymmetric 

skewed.

C
symmetric.

38. Given a discrete uniform distribution, the possible outcome

includes 25 integers from 1 to 25, which of the following is the

corrcet value of P( 5 ≤ X  < 10 ) ?

0.04.

0.20. 

0.50.

39. The stock of AAA company has a 30% probability to rise

every year, if every annual trial is independent from each

other, the probability that the stock will rise more than 1 time

in the next 3 years is:

0.145

0.216

0.377
40. The stock of AAA company has a 30% probability to rise

every year, assume that every annual trial is independent from

each other. If the stock meets the goal of rising more than 1

time in the next 3 years, what is the probability that it fails to

meet the goal?

0.343

0.216

0.784

41. Which of the following is incorrect description

about normal distribution?

kurtosis equals 3

skewness equals 3

excess kurtosis equals 0

42. To calculate possible yield, a multivariate distribution is

most likely to be applied in:

A swap

A portfolio of clean-energy companies' stocks

A T-bill

43. An analyst uses a multivariate normal distribution to

precisely model the returns on 3 stocks, how many parameters

should he get at the beginning?

9
44. A variable obeying normal distribution has a mean of 0.9

and a standard deviation of 1.5. The probability for that

variable to fall between 0.9 and 1.2 is:

7.93%

6.91%.

5.82%.

45. A stock obeying normal distribution has a mean return of

6% and a standard deviation of 18%. The probability for the

stock's return to fall less than 4% is:

37.91%
B

45.62%

57.68%

46. Which of the following can be regarded as a continuous

random variable?

The value of a futures contract quoted in increments of $0.05

The number of boys in a classroom

The stock return of a technology company over the next year

47. Given a discrete random variable Y, the set of all the

possible Y value is Y = {16,25,37,42}. Which of the following is

most likely to be the probability function of Y,  f(y), g(y),

or h  (y) ?
A

f(y).

g(y).

h(y)

48. Given a discrete random variable Y, the set of all the

possible Y value is Y = {20,21,22,23,24,25}.

The estimated value of cumulative distribution function is in

the table, what is the probability that Y takes 23 or 25?

A

0.50

0.45

0.75

49. Which of the following is most suitable to be seen as an

example of a Bernoulli trial?

Estimating the probability that whether an investor will sell all

his stocks or not

B
Determining the strike price of an option

Choosing one kind of fruit from apple, banana and

watermelon

50. The stocks of AAA company have a changing closing price

over the last 3 month:

From May to July, the continuously compounded return of

AAA company's stocks is:

18.61%

17.34%

16.89%
51. Using one-period binomial model, Jack calculated that the

terminal value of a stock is $55, if the current price is $50, the

size of an up move is 1.25 and a down move is 0.8. The

probability of a down move that Jack picked is:

0.50

0.67

0.33

52. Using two-period binomial model, Jack wants to calculate

the terminal value of a put option. If the current price of the

underlying asset is $150 and the strike price is $120, the size of

an up move is 1.69 and a down move is 0.59. Only when the

price is below the strike price can the option has a positive

value, otherwise the value will be zero. How many terminal

nodes can give back positive return？

B
2

53. Using computer to generate several random numbers, all

the numbers fall between 50 and 100. The generating process

obeys a continuous uniform distribution. The probability that

the 16th number generated equals 66.00 is:

0% 

16%

32%

54. In which situation, the Monte Carlo simulation should not

be applied?

answer the "what-if" questions

analyze the complex instrument

C
use past data to generate a distribution of possible security

values

55. Which of the following is not included in the limitations of

Monte Carlo simulation?

it is fairly complex.

it cannnot provide the insights that analytic methods can.

it cannot answer the "what- if” questions.

56. In a standard normal distribution, which of the following

parameter does not equal zero？

Skewness

Variance

Mean
57. A financial analyst is examining whether a stock A from

capital market, the stock mean return is 18 percent and the

standard deviation of return estimate is 25 percent per year,

assuming that a normal distribution describes returns. What is

the probability that stock A return will exceed 22 percent?

0.4364

0.16

0.5636

58. Your client asking you to creat a portfolio which could

provide a minimum return level of 5.2%, because he needs to

pay room rental and medical fee without invading the initial

capital. The following table shows three alternative allocations,

then which one should be used? 

A

Allocation A 

Allocation B

Allocation C

59. Which of the following statements about lognormal

distributions is most correct?

Is useful for modeling asset return

Right skewed

Left skewed

60. A client has asked you to explain the lognormal

distribution is used to describe the price of asset, which of the

following will you most likely include in your explanation?

Asset price is normal.

B
Lognormal distribution is popular.

Asset price are bounded from below by 0.

61. A financial analyst is examining whether a two years price

of stock A, last year is $45, this year is 77, what is most likely

correct?

the continuously compounded rate of return is 53.71%

the continuously compounded rate of return is 71.11%

the continuously compounded rate of return is 43.32%