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Welcome to BUAD 310

Welcome to BUAD 310. Instructor: Kam Hamidieh Lecture 11, Monday February 24, 2014. Agenda & Announcement. Today: We review! Finish up the last in class exercise from last time. Exam 1. It will be in class on Wednesday February 26, 2014.

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Welcome to BUAD 310

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  1. Welcome to BUAD 310 Instructor: Kam Hamidieh Lecture 11, Monday February 24, 2014

  2. Agenda & Announcement • Today: • We review! • Finish up the last in class exercise from last time. BUAD 310 - Kam Hamidieh

  3. Exam 1 • It will be in class on Wednesday February 26, 2014. • It will cover everything up to the end of lecture on 2/19 and homework 1, 2, and 3. • You’ll have 33 multiple choice questions & use Scantron. I’ll pass out the Scantron sheets today. • Exam cover sheet will be up soon. You must read it and sign it. Do not bring it with you. It is part of the exam. • Some exam related material have been posted. • Cheat Sheet: 8.5 by 11 inches, both sides, hand written. You can put anything you wish on it. • Extra office hours: 4-6 PM Today, 2-6 PM tomorrow 2/25. BUAD 310 - Kam Hamidieh

  4. Exam 1 • These are the *only* things you need to bring to the exam: • Scantron sheet filled out • Pencil for the Scantron sheet • Eraser • Z-Tables • Calculator • Cheat sheet, hand written, both sides ok • I will provide you with everything else including scratch paper. BUAD 310 - Kam Hamidieh

  5. In Class Exercise 2 From Last Time Let X and Y be two random variables with Cov(X,Y) = 12500, and the means and standard deviations as given below. Find the expected value and SD of the following random variables derived from X and Y. • 2X + Y • X + Y + 2Y – 2X • Can you think of a real life scenario where (2) could apply? BUAD 310 - Kam Hamidieh

  6. Solutions (1) E[2X + Y] = 2E[X] + Y = (2)(1000) + 2000 = 4000 SD(2X+Y) = sqrt of Var(2X+Y) = sqrt of ( 22(2002) + (12)(6002) + 2(2)(1)(12500) ) ≈ 755 (2) Simplify to –X+3Y first. E[-X + 3Y] = -(1000)+3(2000) = 5000 SD(-X+3Y) = sqrt of Var(-X+3Y) = sqrt of ( (-1)2(2002) + (32)(6002) + 2(-1)(3)(12500) ) ≈ 1790 (3) You can think of –X as being short 1 unit on some stock (it means that you gain if the stock loses values) and having 3 unit of some other stock Y. BUAD 310 - Kam Hamidieh

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