User:Ekhcsub/Quantitative Methods

= Study Session 2 =

a. real risk-free rate, inflation, premiums
nominal risk-free rate = real risk-free rate + expected inflation rate
 * default risk
 * liquidity risk
 * maturity risk
 * required interest rate on a security

b. EAR
$$EAR = (1 + periodic rate)^m - 1$$

c. FV, PV, annuity, perpetuity, annuity due, uneven cash flows
$$FV = PV (1 + I/Y)^N$$ $$FVA_D = FVA_O \times (1 + I/Y)$$ $$PVA_D = PVA_O \times (1 + I/Y)$$ $$PV_{perpetuity} = \frac{PMT}{I/Y}$$
 * FV of an annuity due: $$FVA_D$$
 * PV of an annuity due:
 * Present value of a perpetuity

a. Calculate NPV, IRR
$$NPV = \sum_{t=0}^N \frac{CF_t}{(1+r)^t}$$ $$0 = CF_0 + \frac{CF_1}{1+IRR} + \frac{CF_2}{(1+IRR)^2} + ... + \frac{CF_N}{(1+IRR)^N}$$
 * NPV
 * IRR (internal rate of return): rate of return that equates PV
 * or IRR: discount rate for wich NPV is 0
 * NPV decision rules
 * accept (reject) projects with a positive (negative) NPV
 * project with higher NPV should be accepted in case of mutually exclusive projects

b. Holding period return (HPR, total return)
$$HPR = \frac{ending value}{beginning value}-1$$

n.
= Study Session 3 =

Steps of hypothesis testing

 * 1) . State the hypothesis
 * 2) . Select appropriate test statistic
 * 3) . Specify level of significance
 * 4) . State the decision rule
 * 5) . Collect sample and calculate sample statistics
 * 6) . Make a decision regarding the hypothesis
 * 7) . Make a decision based on the results of the test

f.
--Ekhcsub 23:27, 7 April 2007 (UTC)