L10DiscreteDistributionsFinance

L10DiscreteDistributionsFinance - MGT 2250 —- Lesson 10...

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Unformatted text preview: MGT 2250 —- Lesson 10 Discrete Probability Distributions: Applications In Finance June 9, 2011 Key Terms: Expected Return (Value); Variance; Standard Deviation (Risk); Return/Risk Ratio; Covariance; Weighting; Portfolio Expected Return; Portfolio Risk Economic ( a5} if?» a {3A {:3 Conditions (EC) p (EC) Return Fund X Return Fund Y N6 , Q5 ” I 33 rfw iii ;§Teme:£%/ sgi iwiwe new bi ‘W W, « Ci (w 43% it a 5 {gm g WW, y g g e j m g a, 42’ / {fie} {if jib kg {3‘ x“ W, .M K (32%} ( 5X “’2 “M {imi5ii m i i , f xi “:3 IX “"1" "4 S [Mfgjgiigpifm f“ Variance and Standard Deviations: (Risk): A, Rim—Ma 5‘ zé(xwawzfl09 gji Qijfi/mf Return/Risk Ratio: The observed average return divided by the standard deviation of returns. This is the simplest measure of return to risk trade off . and can be used to compare portfoiio returns ~\ u. {Twinfn- in {inunan fhn \r .u.». “i “nunuy, “u- Coefficient of VariatiomCV—is also user} to compare risk among investments.) 5: .Q m e/ wif¥F9 a6? / g”? H}; tax/f y? K u if E ,5 u» ,, Q “A “W K g, 5 xx fair/:2 9/ 5: View" /””‘\ ‘\ P Q (“a . i / m ywww / 4L7é£y\ at fig}; (31; ; 07> ix.) Covariance: w. * ~ .. t , ‘ w Combined bands. )5 A” M [gig WE Expegted return (Value): E3 <7; W EM %* mm. Variagfiwg and Standard Deviation: (Risk): Wm ,., .Mum‘w- mm “wwwwm... W xxx X 4, in»; k \ {:3 4 + ELY ,4; "‘mfi% ; :32 \ g; L! J Return/Risk Ratio: IUD (WWWWWJC 5902 K7 0“ :92» ,5; Portfolio: A collection of assets. Weighting: If money is invested in two funds, X & Y, then “w” indicates the proportion invested in Fund X and “1-w” indicates the proportion invested in Fund Y. Portfolio Expected Return: w '2, f Portfolio Risliz \ WWW ” fl {’j‘rz‘hp 4 ,*\iz r? +O/w3 U W” > (“M v) if»: " Y M M W .. w w « u H W N m; Mfmw” "wéwmflw \ ml rcjc if}; m m i / , r if (we: t a l / Ma 1 fit/Ligwl +0 to I} ""1 2w a» E 1’; “,3 ){it’ Gizx 75 K 3J {fix [9&6 A <92; Romans»,er \ WWMMWHMWM t. t W M « w W " ’” (x (N Meow” {WWW}? , t a ~ 7;: «53 7m \\ {Q g 3/ r ‘5; E. 3 {w g / 7 i” ‘i 2 , v?" ,«g flflflflfl WM? “M? Li) 4 «’53 i (z .4. z x.“ W x if a; ...
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This note was uploaded on 02/05/2012 for the course MGT 2250 taught by Professor Milne during the Summer '08 term at Georgia Institute of Technology.

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L10DiscreteDistributionsFinance - MGT 2250 —- Lesson 10...

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