SM 560 Final Exam UPDATED ACTUAL
Questions and CORRECT Answers
Probability - CORRECT ANSWER a number that measures the relative likelihood an event will
occur (must be between 0 and 1)
Probability Approach - Empirical Approach - CORRECT ANSWER probability is estimated from
an observed outcome frequency (ex. Sample of 100,000 live births, 3,212 were twins. So prob of twins is
3,212/100,000
Probability Approach - Classical Approach - CORRECT ANSWER Use logic regarding the
experiment's nature to determine probability (ex. in selecting one random card from a 52-card deck,
there's a 13/52 chance the card's suite is a "heart"
Probability Approach - Subjective Approach - CORRECT ANSWER Based on informed
opinion/judgement (ex. Stephen A. believes there's a 10% chance Knicks win the playoffs this year)
Probability Rule - Compliment - CORRECT ANSWER given an event A, the complement of A
which we denote A' consists of everything in the sample space that is not in A
Probability Rule - Union - CORRECT ANSWER The union of two events, A union B, consists of
all outcomes in the sample space that are either in event A, or in event B or both
Probability Rule - Intersection - CORRECT ANSWER the intersection of two events, A intersect B,
consists of all outcomes in a sample space that are in both A and B
General Law of Addition - CORRECT ANSWER P(A union B) = P(A) + P(B) - P(A intersect B)
Conditional Probability - CORRECT ANSWER What is the probability of A, given that B has
occurred? P(A | B)
, Independent Events in Probability - CORRECT ANSWER Two events are independent if the
outcome of 1 does not affect the other (coin flips)
Probability - Cumulative Distribution Functions - CORRECT ANSWER A function that tells us the
probability a variable takes on a value less than or equal to x for each x
Probability Distribution - CORRECT ANSWER (For discrete variables) a function that assigns a
probability for each x
Hypothesis Testing - CORRECT ANSWER using data samples to test hypotheses about the value
of a population parameter
Type I Error - CORRECT ANSWER H0 is true but we reject H0 (control this using alpha as the
level of significance)
Type II Error - CORRECT ANSWER H0 if false but we fail to reject H0 (control this using 1 - Beta
as the power of the test)
Slope - CORRECT ANSWER The predicted change in the Y variable when the X variable
increases by 1 unit
Intercept - CORRECT ANSWER The predicted Y value when the X value is 0. The intercept may
or may not have practical significance/importance
Statistically Significant - CORRECT ANSWER p value < 0.05
R-Squared - CORRECT ANSWER Variance in Y is explained by the variance in X
Multiple Regression - Interaction Terms - CORRECT ANSWER Impact of one X on Y depends on
the value of some other X
Questions and CORRECT Answers
Probability - CORRECT ANSWER a number that measures the relative likelihood an event will
occur (must be between 0 and 1)
Probability Approach - Empirical Approach - CORRECT ANSWER probability is estimated from
an observed outcome frequency (ex. Sample of 100,000 live births, 3,212 were twins. So prob of twins is
3,212/100,000
Probability Approach - Classical Approach - CORRECT ANSWER Use logic regarding the
experiment's nature to determine probability (ex. in selecting one random card from a 52-card deck,
there's a 13/52 chance the card's suite is a "heart"
Probability Approach - Subjective Approach - CORRECT ANSWER Based on informed
opinion/judgement (ex. Stephen A. believes there's a 10% chance Knicks win the playoffs this year)
Probability Rule - Compliment - CORRECT ANSWER given an event A, the complement of A
which we denote A' consists of everything in the sample space that is not in A
Probability Rule - Union - CORRECT ANSWER The union of two events, A union B, consists of
all outcomes in the sample space that are either in event A, or in event B or both
Probability Rule - Intersection - CORRECT ANSWER the intersection of two events, A intersect B,
consists of all outcomes in a sample space that are in both A and B
General Law of Addition - CORRECT ANSWER P(A union B) = P(A) + P(B) - P(A intersect B)
Conditional Probability - CORRECT ANSWER What is the probability of A, given that B has
occurred? P(A | B)
, Independent Events in Probability - CORRECT ANSWER Two events are independent if the
outcome of 1 does not affect the other (coin flips)
Probability - Cumulative Distribution Functions - CORRECT ANSWER A function that tells us the
probability a variable takes on a value less than or equal to x for each x
Probability Distribution - CORRECT ANSWER (For discrete variables) a function that assigns a
probability for each x
Hypothesis Testing - CORRECT ANSWER using data samples to test hypotheses about the value
of a population parameter
Type I Error - CORRECT ANSWER H0 is true but we reject H0 (control this using alpha as the
level of significance)
Type II Error - CORRECT ANSWER H0 if false but we fail to reject H0 (control this using 1 - Beta
as the power of the test)
Slope - CORRECT ANSWER The predicted change in the Y variable when the X variable
increases by 1 unit
Intercept - CORRECT ANSWER The predicted Y value when the X value is 0. The intercept may
or may not have practical significance/importance
Statistically Significant - CORRECT ANSWER p value < 0.05
R-Squared - CORRECT ANSWER Variance in Y is explained by the variance in X
Multiple Regression - Interaction Terms - CORRECT ANSWER Impact of one X on Y depends on
the value of some other X
