Quants Question

We are examining the realtionship between the number of cold calls a broker makes and the number of new accounts the firm as a whole opens. We have determined that the correalation coeffient is equal to 0.70, based om as sample of 16 observations. Is the relationship statistically significant at a 10 percent level of significance, and why or why not? The relationship is: A) not signifcant; the critical value exceeds the t-statistic by 1.91 B) significant; the t-statistic exceeds the critical value by 3.67 C) not significant; the critical value exceeds, the t-statistic by 4.21 D) signifcant; the t-statistic exceeds the critical value by 1.91. Any takers on this one?

r =0.7 T test of significance for r ==> t stat = r * Sqrt(n-2) / sqrt(1-r^2) = 0.7 ^ sqrt(14)/sqrt(.51) = 3.67 tcrit from t-table @ dof = 14, level of significance=10% ==> 1.76 so t-stat exceeds critical value by 1.91 and is significant. Ans d ??

That’s right, though I cant remember where this is in Schweser?

Are you using old question papers, by any chance? This is part of the regression analysis portion for L1 (it was part of curriculum for L1 in 2007, not a part of the 2008 curriculum for L1 any longer)

this looks foreign to me!

I got this question from Q-bank (mistake?), though I looked through the Schweser notes and its not in there. But the the CFAI material does include it towards the end of reading 11, though I think the LOS doesn’t require us to know it. Which is really a good thing since I dont recall reading this (I’m using mostly Schweser)

I think this is an old L1 question, now moved to LII (or maybe even subsumed by the regression section). Do not worry about this LI people.