Final Module (1, 2, 3)

Question 1

Permutation

Answer 1

number of ways to select 𝑘 out of 𝑛 objects, when the
order of selected objects matters

Question 2

Combination

Answer 2

number of ways to select select 𝑘 out of 𝑛 objects,
when the order of selected objects does not matter

Question 3

Logarithm

Answer 3

the power to which the base must be raised to
produce the given number

• Properties of logarithms follow from the properties of exponents.

Question 4

Geometric Sequence

Answer 4

is a sequence of non-zero numbers where each term after the first can be found by multiplying the previous term by a non-zero number, called a common ratio.

Question 5

Capital Greek letter “sigma” means

Answer 5

summation

Question 6

Compounding

Answer 6

ability of money to grow exponentially due to the repeated additions of earnings to the initial investment over time

Question 7

Future value (FV)

Answer 7

the amount to which a cash flow or a series
of cash flows will grow over a given period of time when compounded at a given interest rate

Question 8

Present value (PV)

Answer 8

the value today of a cash flow or a series
of cash flows

Question 9

Discount factor

Answer 9

the coefficient by which the cash flow is
multiplied to discount it back to the present value

Question 10

Time Value of Money

Answer 10

the financial concept that states that the cash flow today is worth more than the cash flow in the future, because of its potential earning power over time

Question 11

Bond

Answer 11

a long-term contract under which a borrower agrees to make payments of interest and principal on specific dates to the holders of the bond

Question 12

Face Value

Answer 12

the amount to be repaid at the end of the term

Question 13

Coupon payment

Answer 13

the specific number of dollars of interest paid each year

Question 14

Maturity date

Answer 14

the date when the face value should be repaid

Term– the time to maturity date

Question 15

Yield to maturity (YTM)

Answer 15

the theoretical interest rate that the investor earns
by holding the bond to maturity = the discount rate at which the sum of all future cash flows (including coupons and face value) is equal to the current price of the bond

Question 16

Two dimensions of Risk Management analysis

Answer 16

(Frequency or Probability) and (Severity or Impact)

Question 17

The intersection of events A and B

Answer 17

a set of all outcomes that are elements of both A and B (“and”): 𝐴 ∩ 𝐵

Question 18

Union A and B

Answer 18

a set of all outcomes that are elements of
either A and B (“or”): 𝐴 ∪ 𝐵

Question 19

Complement of A

Answer 19

a set of all outcomes that are NOT the
elements of A: (line over A) or 𝐴^𝑐

Question 20

Mutually Exclusive Events

Answer 20

Two events are mutually exclusive if, when one event occurs, the other cannot, and vice versa (or 𝐴 ∩ 𝐵 = ∅)

Question 21

Independent events

Answer 21

two events such that the occurrence of one event does not affect the probability of occurrence of the other event