Q1(Part 1 ). Using the annual interest rate of 4 percent (i.e., r = .04), calculate the present values (at t = 0) for the following p
a.$1,000,000 paid at t = 1
b.$1,000,000 paid at t = 2
c.$1,000,000 paid at t = 3
Is the present value of $1,000,000 paid
Problem 1 [SAIR to EAR Conversion] [Discounting & Compounding]:
Fill in the table below for each of the following interest rates:
Case
1
2
3
4
5
Stated Annual Rate
.12
.12
.12
.12
.12
Effective annual interest
rate is:
(1 + sar / n)^n-1
Case-1
Stated Annu
Rates of Return Measuring ExPost (Past) Returns One period investment: regardless of the length of the period. Holding period return (HPR): HPR = (PS+ CF- PB)/PB where PS = Sale price (or P1) PB = Buy price ($you put up) (or P0) CF = Cash flow during hold
The University of Illinois at Chicago ECON346 Econometrics Spring 2011 Instructor Email Phone Office : Jin Man Lee, Nipen Wosti
: [email protected], [email protected] : (312)-413-9444 (Do not leave message since we are sharing the number with others) : 705 UH
E
Investment: 1. Expect of deriving greater resources in the future. 2 Time and risk components in investment. (financial assets &financial
markets)Players .)- Investment process: topdown vs. bottom up Principle: risk return tradeoff. ESSENTIAL NATURE OF IN
Primary vs. Secondary Market Security Sales Primary: New issue is created and sold. Key factor: issuer receives the proceeds from the sale.
Public offerings: registered with the SEC and sale is made to the investing public. Private offerings: not register
Option Terminology listed call option A contract giving the holder the right to buy 100 shares of stock at a preset price (exercise or strike price) on or before a preset date. Expirations of 1,2,3,6,& 9 months and sometimes 1 year are normal contract per
21. On a standard expected return vs standard deviation graph investors will prefer portfolios that lie to the A. Northeast 22. The variance of a portfolio of risky securities is C. The weighted sum of the securities' covariances 23. The measure of risk u
Random Variable : a variable whose value is determined by the outcome of an experiment. Probability A probability distribution function (PDF) P[Xi] for a discrete random variable X assigns probabilities to the possible values X1, X2Xn. It shows how the pr
SUMMARY OUTPUT Regression Statistics Multiple R 0.85 R Square 0.72 Adjusted R Square .71 0 Standard Error 12.32 Observations 51 ANOVA df Regression Residual Total SS MS 1 18805.57 18805.57 49 7434.28 151.72 50 26239.85 F Significance F 123.95 0
Coefficien
Chapter 1
The Investment Environment
What is Investment?
Commitment of current resources in the expecta9on of deriving greater resources in the future Time and risk components in investment We focus on investment in
I. Some Special Independent Variables
1.Dummy variables Some concepts might seem impossible to include in an equation because they are not quantitative like a gender variable. 1) Intercept Dummy a. Examples: seasonal effects, male/female, brands b. Interp
1. Constant: Include it but don't rely on it. No constant can violate assumption that error terms have zero mean, so leave it in even if it is not significant. Don't rely on constant for analysis or inference because: contains mean effects of marginal var
ECON346 (Econometrics)
Week13-14 Page 1
Serial Correlation (autocorrelation)
Serial correlation is usually associated with time series data, but can occur in crosssectional data also, in which case it is called spatial correlation (correlation in space ra
Chapter 08 - The Efficient Market Hypothesis
CHAPTER EIGHT THE EFFICIENT MARKET HYPOTHESIS
CHAPTER OVERVIEW
This chapter examines the concept of market efficiency. We are asking whether securities are on average fairly priced according to the benefits the
22. The variance of a portfolio of risky securities is _. A. The sum of the securities' covariances B. The sum of the securities' variances C. The weighted sum of the securities' covariances D. The weighted sum of the securities' variances
23. The measure
Econ 346 Lab #7 Regression Using SAS: Heteroskedasticity
Apr 19th, 2011
Agenda
Goals for todays lab session Use SAS to study the petroleum example in Studenmund's textbook
This is an in-lab assignment!
Get the SAS code and data from
http:/tigger.uic.edu
ECON 346 Econometrics Lab 7: Introduction to SAS
We will use SAS to study the petroleum example in Studenmunds textbook. You can get the SAS code from following class website. http:/tigger.uic.edu/~jmlee/econ346/data/GAS1.sas.txt (Please be careful the ca
Chapter 5
Risk & Return
5.1 Rates of Return
Measuring ExPost (Past) Returns
Oneperiod investment: regardless of the length of the period. Holding period return (HPR): HPR = (PS+ CFPB)/PB where PS = Sale
Chapter 7
Capital Asset Pricing and Arbitrage Pricing Theory
7.1 The Capital Asset Pricing Model
Capital Asset Pricing Model (CAPM)
Equilibrium model that predicts the rela3onship between risk and expected returns on risky as
Chapter7
Capital Asset Pricing and Arbitrage Pricing Theory
7.1TheCapitalAssetPricingModel
CapitalAssetPricingModel(CAPM)
Equilibriummodelthatpredictstherela3onship betweenriskandexpectedreturnsonrisky assets.CAPMunderliesallmodernnancial theory Derivedu