Explain the Fundamental Relationship among Saving, Investment, Fiscal Balance, and Trade Balance

Saving and investing often are used interchangeably, but there is a difference. Saving is setting aside money you don’t spend for emergencies or for a future purchase. Investing, on the other hand, is buying assets such as real estate, stocks…

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Comparison among 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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Compare Nominal and Real GDP and Calculate and Interpret the GDP Deflator

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

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Compare Methods of Calculating GDP

In calculating the Gross Domestic Product (GDP), there are two different approaches used. The first one is the income approach. This method measures GDP as a summation of all income generated in the economy in that year. The income includes…

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Tracking Error

Tracking error refers to the difference in returns between a portfolio (index fund) and a benchmark (target index) against which its performance is evaluated. In other words, it is the difference between the returns on an index fund and the…

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Binomial Stock Price Tree

A binomial tree is used to predict stock price movements assuming there are two possible outcomes, each of which has a known probability of occurrence.

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Definition of a Discrete Uniform random Variable, a Bernoulli Random Variable, and a Binomial Random Variable

In finance, probability distributions have different shapes. As such, we describe a random variable based on the shape of the underlying distribution.

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The Cumulative Distribution Function: Interpretation and determination of Probabilities

A cumulative distribution offers a convenient tool for determining probabilities for a given random variable. As you will recall from a previous learning outcome statement, a cumulative distribution function, F(x), gives the probability that the random variable X is less…

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Calculating Probabilities given the Discrete Uniform and the Binomial Distribution Functions.

We can calculate and interpret probabilities of random variables that assume either the uniform distribution or the binomial distribution:

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Standard VII(A) – Responsibilities as a CFA Institute Member or CFA Candidate

Standard VII – Responsibilities as a CFA Institute Member or CFA Candidate Standard VII outlines the responsibilities that CFA members or Candidates should have regarding their profession and the CFA Institute. Standard VII(A) – Guidance Standard VII(A) – Guidance designates…

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