Econ 1710 - Study guides, Class notes & Summaries

The material wealth of a society is a function of _________. A. all financial assets B. all real assets C. all financial and real assets D. all physical assets E. all commodities B. all real assets _______ is/are a real asset(s). A. Only land B. Only machines C. Only stocks and bonds D. Only knowledge E. Land, machines, and knowledge are real assets E. Land, machines, and knowledge are real asset

Nominal vs Real Interest Rate (+ Equations)Nominal interest rate: the growth rate of your $ as quoted on the investment Real interest rate: the growth rate of your purchasing power Approximation: r(r) = r(n) - i Exact: r(r) = (1+r)/(1+i) - 1 Fisher equation: r(n) = r(r) - E(i) What does the Sharpe Ratio measure?It is equal to the risk premium of portfolio divided by standard deviation. It measures tradeoff between return and risk. Three properties of a normal distribution1) Symmetric ...

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Hedge RatioNumber of stock shares needed to hedge the price risk of writing an option Hedge Ratio = H= [Cu-Cd] / [uS0-dS0], for calls [Pu-Pd] for puts Would you expect a $1 increase in a call option's exercise price to led to a decrease in the option's value of more or less than $1A $1 increase in a call option's exercise price would lead to a decrease in the option's value of less than $1. The change in the call price would equal $1 only if: (i) there were a 100% probability that ...

This is a comprehensive and detailed note on Arbitrage Pricing Theory & Multifactor Models of Risk and Return for Econ 1710. Essential!! To your success in academics!!

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perfectly competitive marketoccurs when all companies sell identical products, market shares does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information and companies cannot determine prices. MonopolyA pure monopoly exists when a single firm is the sole producer of a product for which there are no close substitutes. monopolistic competitionoccurs when an industry has many firms offering products that are similar but not identi...

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This is a comprehensive and detailed note on chapter 5;Risk, Return, and the historical record Quality stuff!! You'll need it!!