Since the move in prices is 2% per day in either direction, the value of the DJIA after day one in the up state will be 10,000 * 1.02 = 10,2 ...
2013-04-28 12:04Where the term in brackets = n! / {(n - x)!x!}, and p = the probability of success on each trial. i: Calculate the expected value and varian ...
2013-04-28 12:04cumulative distribution function or just distribution function defines the probability that a random variable takes a value equal to or less ...
2013-04-28 12:04d: Define a probabiliry function and state whether a given function satisfies the conditions for a probability function. The probability fun ...
2013-04-28 12:04A probability distribution specifies the probabilities of all the possible outcomes of a random variable. Those outcomes may be discrete or ...
2013-04-28 12:04The permutation formula applies to only two groups of predetermined size. Look for a specific reference to order being important. x: Calcula ...
2013-04-28 12:04Example: Electcomp Corporation manufactures electronic components for computers and other devices. There is speculation that Electcomp will ...
2013-04-28 12:04We simply place the values into the formula for the variance: Var(R p ) = 0.90 2 * 0.0011 + 0.10 2 * 0.016 + 2 * 0.9 * 0.10 * (-0.0036). Var ...
2013-04-28 11:04q: Explain the relationship among covariance, standard deviation, and correlation. Thecovariance is a more general representation of the sam ...
2013-04-28 11:04The covariance is the most basic measure of how two assets move together. The covariance is the expected value of the product of the deviati ...
2013-04-28 11:04The value 2 (X) = .000629 is in squared units and is very difficult to interpret. The standard deviation is more useful: = (.000629) .5 = .0 ...
2013-04-28 11:04The variance is the expected value of the squared deviations of each observation from the random variables expected value. As an expected va ...
2013-04-28 11:04The total probability rule is used to demonstrate how joint probabilities tie in with unconditional probabilities. If we continue with our e ...
2013-04-28 11:04Independent events are a list of events where knowledge of one has no influence on the other. That is easily expressed using conditional pro ...
2013-04-28 11:04What is the probability of recession and an increase in interest rates? P(RI) = P(R given I) * P(I) = .7 * .4 = .28 h: Calculate,using the a ...
2013-04-28 11:04There is a relationship between the *s P(AB) and P(A I B). It is called the multiplication rule for probabilities: P(AB) = P(A I B) * P(B) I ...
2013-04-28 11:04pairs arbitrage trade, where he/she short sells A and uses the proceeds to buy stock B. e: Distinguish between unconditional and conditional ...
2013-04-28 11:04c: Distinguish among empirical, a priori, and subjective probabilities. We can assign probabilities to events three ways: We calculate an em ...
2013-04-28 11:04Semi-logarithmic scales use an arithmetic scale on the horizontal axis, but use a logarithmic scale on the vertical axis. Hence, values on t ...
2013-04-28 11:04A negatively skewed distribution is the opposite of a positively skewed distribution. A negatively skewed distribution has a disproportionat ...
2013-04-28 11:04Example: The mean monthly return on T-bills is 0.25%. The mean monthly return on the SP 500 is 1.30% with a standard deviation of 7.30%. Cal ...
2013-04-28 11:04The coefficient of variation expresses how much dispersion exists relative to the mean of a distribution and allows for direct comparison of ...
2013-04-28 11:04Sample standard deviation can be found by taking the positive square root of the sample variance. Example: Continuing with our example, take ...
2013-04-28 11:042 + (20 - 22) 2 + (23 - 22) 2 } / 5 = 35.60% 2 Population standard deviation is the square root of the population variance. Example: Continu ...
2013-04-28 11:0412 = 18%. Mean absolute deviation (MAD) is the average of the absolute values of the deviations of individual observations from the arithmet ...
2013-04-28 11:04The return observation half way down from the top is 23%. The mode of a data set is the value of the observation that appears most frequentl ...
2013-04-28 11:04of an annuity due that will pay $100 per year for each of the next three years, given the cash flows can be invested at an annual rate of 10 ...
2013-04-28 11:04Example: For the last three years the return for Acme Corporation common stock have been -9.34%, 23.45%, and 8.92%. Find the geometric mean. ...
2013-04-28 11:04Example: A stock you and your research partner are analyzing has 12 years of annualized return data. The returns are 12%, 25%, 34% , 15%, 19 ...
2013-04-28 11:04Another useful way to present data is the relative frequency. Relative frequency is calculated by dividing the frequency of each return inte ...
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