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Intro to Corporate Finance > Statistics > Flashcards

Statistics Flashcards

1
Q

What is the Arithmetic Mean?

A

The sim of all the inputs divided by the number of them. Usually called the Average.

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2
Q

What is the Mode?

A

The data item that occurs most frequently. Just look for the most frequently occurring number

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3
Q

What is the Median?

A

The middle number in a sequence, if there is an even number take the Mean of the middle two!

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4
Q

What is the Deviation?

A

It is the difference between the actual data and the arithmetic mean of the data set.

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5
Q

How do you get variance from deviation?

A

You square each deviation to get rid of the negative numbers and then take the arithmetic mean of them.

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6
Q

What is variance?

A

It is the mean of the squared deviations.

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7
Q

What is standard deviation?

A

Square root of the variance. Gets you back into numbers that are similar to the original data.

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8
Q

What is Correlation?

A

The strength of the relationship between two sets of variables.

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9
Q

What is regression?

A

Determines the Nature of the relationship between two variables.

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10
Q

What is a Normal Distribution?

A

If you take enough samples of data then the will form a bell curve shape around the mean. This is how we get to SD and SEM.

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11
Q

How do you estimate population level Standard Deviation, o?

A

You take SDsample x Square root(n/n-1)

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12
Q

What is Standard Error?

A

ITs the Standard deviation of the Means. If you did lots of different sample groups of the population and plotted there means they would be normally distributed on a bell curve. The mean of this curve will be the population mean, u. This curve has a SD called SEM.

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13
Q

What is the calculation for SEM?

A

SE= SDpopulation/Square root n

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14
Q

What is a 95% confidence level?

A

It is 2 SEMs away from the population mean. or 1.96 to be precise. Similar to 2 SDs.

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15
Q

How do we get a 95% Confidence Interval?

A

Sample Mean +/- 1.96x population SD o/square root n

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16
Q

What is regarded as a large sample size?

A

30

17
Q

What do we get when we have a small sample size?

A

A t-type distribution

18
Q

What are degrees of freedom?

A

In small sample sizes, you use degrees of freedom instead of SEM. Degrees of freedom are always -1 from the sample size. (1 has 0 degrees of freedom)

19
Q

Where do you find degrees of freedom confidence intervals?

A

In the t-distribution chart.

20
Q

What is the Correlation Coefficient?

A

A number between -1 and 1

21
Q

How do you work out Correlation Coefficient?

A

Excel!!!

22
Q

What is the Coefficient of Determination, or R squared?

A

Correlation Coefficient Squared! Expressed as a percentage!

23
Q

What is a Regression Line?

A

Its the calculated line that best fits the data around a scatter diagram. y=a+bx Where a is the intercept and b is the slope of the line. Use Excel! Formula for finding a new y for any x.

24
Q

How do you know how accurate a Regression Line is?

A

The Correlation Coefficient.

25
Q

What is the point of considering the Time Value of Money?

A

Money today isn’t worth the same as money in the future. If you were to accept 100 next year instead of today you would loose out as you can invest/inflation.

26
Q

What is the formula for Compound Interest?

A

= C x (1+r)^n

27
Q

What is Discounting?

A

Basically the reverse of Compounding. You can work back to Present Value by the Formula.
PV=FV x 1/(1+r)^n

28
Q

What is an Annuity?

A

A product that provides equal payments over a defined period, in exchange for a lump payment at the start.

29
Q

Is a Mortgage an Annuity?

A

Yes, its the same but the bank is the one giving the payment.

30
Q

What is Perpituity?

A

An Annuity with no defined end period!

Intro to Corporate Finance (5 decks)

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