Quants

Question 1

Bank Discount Yield formula

Answer 1

= (D/F) * (360/T)

Question 2

Geometric Mean formula

Answer 2

= (1+R1)(1+R2)(1+Rn…) [yx] n [1/x] - 1

Question 3

P(AorB) formula

Answer 3

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

Question 4

P(A/B) formula

Answer 4

= P(AB) / P(B)

Question 5

P(AB) formula - dependent events

Answer 5

= P(A/B) * P(B)

Question 6

P(AB) formula - independent events

Answer 6

= P(A) * P(B)

Question 7

“compound rate of return of the portfolio” aka…

Answer 7

geometric mean

Question 8

“portfolio average return” aka…

Answer 8

geometric mean

Question 9

Bayes formula

Answer 9

Updated Probability of Event Given Info = (Prob of Info Given Event / Unconditional Prob of New Info) * Prior Prob of Event

Question 10

Money Weighted Return is sensitive to…

Answer 10

the additions and withdrawals of funds over the course of the investment

Question 11

HPR formula

Answer 11

= Ending-Beginning / Beginning

Question 12

MWR formula

Answer 12

= IRR

Question 13

empirical probability

Answer 13

probability estimated from data as a relative frequency of occurrence

Question 14

subjective probability

Answer 14

probability drawing on personal/subjective judgement

Question 15

priori probability

Answer 15

probability obtained based on logical analysis

Question 16

Bayes formula - P(Event/Info)

Answer 16

= P(Event/Info) = [ P(Info/Event) / P(Info) ] * P(Event)

Question 17

coefficient of variation (CV) formula

Answer 17

= sd / mean

Question 18

permutation formula

Answer 18

nPr = n! / (n-r)!

order DOES matter

Question 19

the arithmetic sum of deviations around the mean will always…

Answer 19

equal zero

Question 20

the mean absolute deviation will always…

Answer 20

be less than or equal to the standard deviation

Question 21

Time Weighted Return TWR

Answer 21

= (1+HPR1)(1+HPR2)(1+HPRn…) - 1

Question 22

Effective Annual Rate (EAR) formula

Answer 22

= (1+periodic rate)^m - 1

periodic rate is stated annual rate divided by # of compounding periods (m)

Question 23

if the P-value is less than the specified level of significance…

Answer 23

the null hypothesis is rejected

Question 24

P-values are never…

Answer 24

negative

Question 25

t-test statistic formula

Answer 25

= (d-h) / (sd/square root of n) where d= the mean difference, h= hypothesized difference of the means

Question 26

Z statistic formula

Answer 26

= (h-mu) / popSD where h= hypothetical value. then use Z to find probability of a Z value. If negative, 1-P(Z)

Question 27

discrete random variable

Answer 27

a random variable that can take on at most a countable number of possible values. ex. number of days

Question 28

continuous random variable ex.

Answer 28

percentage changes, returns

Question 29

a statistically significant result might not be...

Answer 29

economically meaningful after accounting for risk, transaction costs, and taxes

Question 30

Central Limit Theorem

Answer 30

given a pop that has finite variance and large sample size, the distribution of the sample will be normal, will have a mean equal to the pop mean, and will have a variance equal to the pop variance

Question 31

central limit theorem holds without regard to...

Answer 31

the distribution of the underlying pop

Question 32

Standard Error of the Sample Mean formula

Answer 32

= sd/square root of n

Question 33

Confidence Interval for the Pop Mean formula

Answer 33

= X bar +/- t (sd/square root of n) do not divide t by 2

Question 34

Type II Error

Answer 34

double negative. fail to reject the null

Question 35

Type 1 Error

Answer 35

reject a true null

Question 36

if the P-value exceeds the stated level of significance...

Answer 36

the null hypothesis cannot be rejected

Question 37

Resistance

Answer 37

a price range in which selling activity is sufficient to stop the rise in price

Question 38

Support

Answer 38

low price range in which buying activity is sufficient to top the decline in price

Question 39

change in polarity

Answer 39

refers to support, when breached, becomes resistance; resistance, when breached, becomes support

Question 40

as the degree of confidence is increased...

Answer 40

the confidence interval becomes wider. a larger sample size decreases the width of the confidence interval

Question 41

use Z-statistic when...

Answer 41

sample has normal distribution with known variance. does NOT use degrees of freedom

Question 42

nonparametric tests

Answer 42

primarily concerned with ranks, signs, or groups

Question 43

Bollinger Bands

Answer 43

price volatility