Information not given in a question? Or did I miss it?

Below is the question ID 1208507, how are we supposed to know that the growth rate is compounded, covariance stationary or that the mean is constant? I know they are the number one book seller but I don’t think that means their growth rate is growing at a compounded rate.

Dianne Hart, CFA, is considering the purchase of an equity position in Book World, Inc, a leading seller of books in the United States. Hart has obtained monthly sales data for the past seven years, and has plotted the data points on a graph. Which of the following statements regarding Hart’s analysis of the data time series of Book World’s sales is most accurate? Hart should utilize a:


log-linear model to analyze the data because it is likely to exhibit a compound growth trend.


mean-reverting model to analyze the data because the time series pattern is covariance stationary.


linear model to analyze the data because the mean appears to be constant.


A log-linear model is more appropriate when analyzing data that is growing at a compound rate. Sales are a classic example of a type of data series that normally exhibits compound growth.

I see no reason to assume exponential growth.

Where did you get this question?

This was Kaplan Q Bank question the ID is 1208507. I have come across a few of these poorly written questions so far.

Welcome to the world of third-party prep materials.

Rest assured that on the real exam, all of the necessary information will be there.