Quantitative

Question 1

P(AB)

Answer 1

P(A|B) * P(B)

Question 2

P(A or B)

Answer 2

P(A) + P(B) - P(AB)

Question 3

Probability

to

Odds

Answer 3

P(E)

—————

1 - P(E)

Question 4

Expected Value

E(X)

Answer 4

ΣX*P(X)

Weighted average of the possible outcomes of a random variable, where the weights are the probabilities that the outcomes will occur.

Question 5

Degrees of Freedom

Answer 5

n - 1

Question 6

Combination

Answer 6

n!

——————

(n - r)! r!

Question 7

Permutation

Answer 7

n!

——————

(n - r)!

Question 8

Percentile

Answer 8

(n + 1)*(y/100)

Question 9

Money-Weighted

Rate of Return

Answer 9

The internal rate of return (IRR)

The rate of return where NPV = 0

Question 10

Time-Weighted

Rate of Return

Answer 10

For periods less than one year

Σ(1 + HPR_n) - 1

For periods greater than one year (geometric mean)

Σ(1 + HPR_n)^1/n - 1

The rate at which $1 compounds over time.

Question 11

HPR

Answer 11

(P₁ + D)

   ————   - 1

P

Question 12

Harmonic Mean

Answer 12

1

———————

Σ(1/P_n)

Average cost of shares purchased over time.

(Dollar cost averaging)

Question 13

Population Variance

Answer 13

Σ(x - µ)^{<span>2</span>}

—————

n

Question 14

Sample Variance

Answer 14

Σ(x - µ)^{<span>2</span>}

—————

(n - 1)

Question 15

MAD

Answer 15

Σ|x - µ|

—————

n

Question 16

Z or T

Answer 16

(x - µ)

————

σ

Question 17

Standard Deviation

σ

Answer 17

SQRT of the Variance (σ2)

_SQRTσ²

Question 18

Standard Error

Answer 18

σ

————

_SQRTn

The deviation between the sample mean and the population mean.

Question 19

Z Score for 90%

Answer 19

1.65

µ (+/-) 1.65σ

Question 20

Z Score for 95%

Answer 20

1.96

µ (+/-) 1.96σ

Question 21

Z Score for 99%

Answer 21

2.58

µ (+/-) 2.58σ

Question 22

Confidence Interval

Answer 22

X(+/-) Zσ

or

X(+/-) Z(Standard Error)

Question 23

7 Steps in

Hypothesis Testing

Answer 23

1. State hypothesis
2. Select test statistic
3. Specify level of significance
4. State decision rule
5. Collect sample, calculate sample statistic
6. Make a decision based on hypothesis
7. Make a decision based on results

Question 24

Hypothesis Test Statistic

Answer 24

(x - H₀)

————————

Standard Error

Question 25

Coefficient of Variation

CV

Answer 25

S

———

X

Excess risk per unit of return.

(Lower is better)

Question 26

Sharpe Ratio

Answer 26

E(R_p) - R_rf

——————

σ_p

Excess return per unit of risk.

(Higher is Better)

Question 27

Chebyshev’s Inequality

Answer 27

The percentage of observations that lie within k standard deviations of the mean is at least

1 - 1/k²

for all k > 1 regardless of the shape of the distribution.

Question 28

Roy’s Safety First Criterion

Answer 28

E(R_p​) - R_L

——————

σ_p

Probability that the portfolio expected return E(Rp) will be greater than the threshold R_L.

(Higher is Better)

Question 29

APR to EAR

Answer 29

(1 + APR/n)ⁿ - 1

Question 30

EAR to APR

Answer 30

[(1 + EAR)^1/n- 1]n

Question 31

EAR to HPR

Answer 31

(1 + EAR)^n/365 - 1

Question 32

HPR to EAR

Answer 32

(1 + HPR)^365/n - 1

Question 33

HPR to r_{<span>mm</span>}

Answer 33

HPR(360/n)

Question 34

EAR with

Continuous Compounding

Answer 34

e^r - 1

or

(re^x - 1)

Question 35

Perpetuity

Answer 35

PMT

P = ———

     r