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Forward Price of an Asset With Zero, Positive, or Negative Net Cost of Carry

Cost of Carry The cost of carry is defined as the net of the costs and benefits. The term “carry” is analogous in that storage (or holding) of an asset attractcts net costs i.e, the costs to “carry” an asset….

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Comparing GDP, National Income, Personal Income, and Personal Disposable Income

GDP GDP stands for Gross Domestic Product. It refers to the market value of all goods and services produced within an economy in a given period of time. Equivalently, GDP also refers to the total income earned by each household,…

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Nominal GDP, Real GDP and GDP Deflator

It is economically healthy to exclude the effect of general price changes when calculating the GDP. This is because higher (lower) income caused by inflation does not indicate a higher (lower) level of economic activity. Real GDP Economists describe real GDP…

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Value-of-Final-Output and Sum-of-Value-Added Methods of Calculating GDP

There are two approaches that are used in the calculation of the Gross Domestic Product (GDP). The first one is the income approach. This method measures GDP as a summation of all income generated in the economy in a given…

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Relationship between Normal Distribution and Lognormal Distribution

A variable \(X\) is said to have a lognormal distribution if \(Y = ln(X)\) is normally distributed, where “ln” denotes the natural logarithm. In other words, when the logarithms of values form a normal distribution, we say that the original…

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Shortfall Risk, Safety-first Ratio and Identification of an Optimal Portfolio Using Roy’s Safety-first Criterion

Shortfall risk refers to the probability that a portfolio will not exceed the minimum (benchmark) return that has been set by an investor. In other words, it is the risk that a portfolio will fall short of the level of…

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Selecting Data Visualization Types

Guide to Selecting Visualization Types For numerical data, use a histogram, frequency polygon, or cumulative distribution chart. For category-based data, use a bar chart, tree-map, or heat map. For unstructured data, use a word cloud. For displaying relationships between two…

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Alternative Mean Definitions for Different Investment Problems

Suitability of Alternative Mean Definitions for Different Investment Problems $$\begin{array}{l|l}\textbf { Type of Data } & \textbf { Mean to Use } \\\hline \text { Single period data } & \text { Arithmetic mean } \\\hline \text { More than…

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CFA Level 1 Study Notes – Quantitative Methods

2022 Syllabus Study Session 1 R01 2022 – Time Value of Money -LOS a: interpret interest rates as required rates of return, discount rates, or opportunity costs -LOS b: explain an interest rate as the sum of a real risk-free…

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