# on 24-Jul-2017 (Mon)

#### Flashcard 1430814854412

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#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4
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We assume that when comparing any three distinct bundles, A, B, and C, if A is preferred to B, and simultaneously B is preferred to C, then it must be true that A is preferred to C. This assumption is referred to as the assumption of [...] , and it is assumed to hold for indifference as well as for strict preference.

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an>We assume that when comparing any three distinct bundles, A, B, and C, if A is preferred to B, and simultaneously B is preferred to C, then it must be true that A is preferred to C. This assumption is referred to as the assumption of transitive preferences , and it is assumed to hold for indifference as well as for strict preference.<span><body><html>

#### Original toplevel document

3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
that about his two children. In effect, the father neither prefers one to the other nor is, in any meaningful sense, indifferent between the two. The assumption of complete preferences cannot accommodate such a response. Second, <span>we assume that when comparing any three distinct bundles, A, B, and C, if A is preferred to B, and simultaneously B is preferred to C, then it must be true that A is preferred to C. This assumption is referred to as the assumption of transitive preferences , and it is assumed to hold for indifference as well as for strict preference. This is a somewhat stronger assumption because it is essentially an assumption of rationality. We would say that if a consumer prefers a skiing holiday to a diving holiday and a diving

#### Flashcard 1435741064460

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#2-1-3-economic-rent #2-1-types-of-profit-measures #cfa-level-1 #economics #has-images #microeconomics #reading-15-demand-and-supply-analysis-the-firm #section-2-objectives-of-the-firm #study-session-4

Question

The amount of this economic rent is calculated as [...].
(P2P1) × Q1

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Economic rent
to the business that supplies the item. When demand increases from Demand 1 to Demand 2 , price rises to P 2 , where at this higher price level economic rent is created. The amount of this economic rent is calculated as <span>(P 2 – P 1 ) × Q 1 . The firm has not done anything internally to merit this special reward: It benefits from an increase in demand in conjunction with a supply curve that does not fully adjust with an in

#### Flashcard 1442637548812

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#cfa-level-1 #microeconomics #monopoly #reading-16-the-firm-and-market-structures #section-2-analysis-of-mkt-structures #study-session-4
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In most cases, the monopoly power provider is allowed to earn a normal return on its investment and prices are set by [...] to allow that return.
the regulatory authority

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#### Parent (intermediate) annotation

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The most common example of a regulated monopoly is the local electrical power provider. In most cases, the monopoly power provider is allowed to earn a normal return on its investment and prices are set by the regulatory authority to allow that return.

#### Original toplevel document

2. ANALYSIS OF MARKET STRUCTURES
one of the carriers changes its pricing package, others will likely retaliate. Understanding the market structure of oligopoly markets can help in identifying a logical pattern of strategic price changes for the competing firms. <span>Finally, the least competitive market structure is monopoly . In pure monopoly markets, there are no other good substitutes for the given product or service. There is a single seller, which, if allowed to operate without constraint, exercises considerable power over pricing and output decisions. In most market-based economies around the globe, pure monopolies are regulated by a governmental authority. The most common example of a regulated monopoly is the local electrical power provider. In most cases, the monopoly power provider is allowed to earn a normal return on its investment and prices are set by the regulatory authority to allow that return. 2.2. Factors That Determine Market Structure Five factors determine market structure: The number and relative size of firms

#### Flashcard 1449953725708

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In evaluating financial reports, analysts typically have a specific economic decision in mind.

Examples of these decisions include the following:

• Evaluating a subsidiary or operating division of [...]
• ​Deciding whether to make a [...] or other private equity investment.

a parent company.

venture capital

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merger or acquisition candidate. Evaluating a subsidiary or operating division of a parent company. Deciding whether to make a venture capital or other private equity investment. Determining the <span>creditworthiness of a company in order to decide whether to extend a loan to the company and if so, what terms to offer. <span><body><html>

#### Original toplevel document

2. SCOPE OF FINANCIAL STATEMENT ANALYSIS
ing, and financing decisions but do not necessarily rely on analysis of related financial statements. They have access to additional financial information that can be reported in whatever format is most useful to their decision.) <span>In evaluating financial reports, analysts typically have a specific economic decision in mind. Examples of these decisions include the following: Evaluating an equity investment for inclusion in a portfolio. Evaluating a merger or acquisition candidate. Evaluating a subsidiary or operating division of a parent company. Deciding whether to make a venture capital or other private equity investment. Determining the creditworthiness of a company in order to decide whether to extend a loan to the company and if so, what terms to offer. Extending credit to a customer. Examining compliance with debt covenants or other contractual arrangements. Assigning a debt rating to a company or bond issue. Valuing a security for making an investment recommendation to others. Forecasting future net income and cash flow. These decisions demonstrate certain themes in financial analysis. In general, analysts seek to examine the past and current performance and financial position of a

#### Flashcard 1533057568012

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If a firm can cover its variable costs but not all of the total costs, the firm should attempt to operate by [...] to buy time to return operations back to profitability.

negotiating special arrangements with creditors

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Shutdown Analysis
For the most recent financial reporting period, a business domiciled in Ecuador (which recognizes the US dollar as an official currency) has revenue of $2 million and total costs of$2.5 million, which are or can be broken down into total fixed cost of $1 million and total variable cost of$1.5 million. The net loss on the firm’s income statement is reported as $500,000 (ignoring tax implications). In prior periods, the firm had reported profits on its operations. What decision should the firm make regarding operations over the short term? What decision should the firm make regarding operations over the long term? Assume the same business scenario except that revenue is now$1.3 million, wh

#### Flashcard 1621029686540

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#cashflow-statement
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CFO does not include cash outlays for [...]
replacing old equipment

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Subject 3. Cash Flow Statement Analysis
s point of view, cash flows from operation activities have two major drawbacks: CFO does not include charges for the use of long-lived assets. Recall that depreciation is added back to net income in arriving at CFO. <span>CFO does not include cash outlays for replacing old equipment. Free Cash Flow (FCF) is intended to measure the cash available to a company for discretionary uses after making all required cash outlays. It accoun

#### Flashcard 1621047512332

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#cashflow-statement
Question
FCFF = NI + NCC + Int (1 - Tax rate) - FCInv - WCInv

NI= [...]

NCC= [...]
• NI: Net income available to common shareholders.
• NCC: Net non-cash charges.

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Subject 3. Cash Flow Statement Analysis
; Free cash flow = CFO - capital expenditure Free Cash Flow to the Firm (FCFF): Cash available to shareholders and bondholders after taxes, capital investment, and WC investment. <span>FCFF = NI + NCC + Int (1 - Tax rate) - FCInv - WCInv NI: Net income available to common shareholders. It is the company's earnings after interest, taxes and preferred dividends. NCC: Net non-cash

#### Flashcard 1621240712460

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The indirect method adjusts net income for all non-cash items and the net changes in [...].
the operating working capital accounts

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Subject 2. Preparing the Cash Flow Statement
; It adjusts each item in the income statement to its cash equivalent. It shows operating cash receipts and payments. More cash flow information can be obtained and it is more easily understood by the average reader. <span>The indirect method reconciles net income to net cash flow from operating activities by adjusting net income for all non-cash items and the net changes in the operating working capital accounts. It shows why net income and operating cash flows differ. It is used by most companies. The direct and indirect methods are alternative formats for reporti

#### Flashcard 1622016396556

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#tvm
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One can always find the future value of a series of unequal cash flows by [...]
compounding the cash flows one at a time.

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#### Flashcard 1626659491084

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• Pt = [...]
• P(t-1) = price per share at the end of time period t-1, the time period immediately preceding time period t
• Pt - Pt-1 = [...]
• Dt = [...]
price per share at the end of time period t

price appreciation of the investment

cash distributions received during time period t

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Subject 2. Holding Period Return
t is the total return, or holding period return (HPR). HPR measures the total return for holding an investment over a certain period of time, and can be calculated using the following formula: <span>P t = price per share at the end of time period t P (t-1) = price per share at the end of time period t-1, the time period immediately preceding time period t P t - P t-1 = price appreciation of the investment D t = cash distributions received during time period t: for common stock, cash distribution is the dividend; for bonds, cash distribution is the coupon payment. It has two important characteristics: It has an element of time attached to it: monthly, quarterly or annual returns. HPR can be computed for any time period. It has n

#### Flashcard 1635395702028

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[...] scales are qualitative rather than quantitative.
Nominal scales

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Subject 2. Measurement Scales
3; Nominal Scale Nominal measurement represents the weakest level of measurement. It consists of assigning items to groups or categories. No quantitative information is conveyed and no ordering (ranking) of the items is implied. <span>Nominal scales are qualitative rather than quantitative. Religious preference, race, and sex are all examples of nominal scales. Another example is portfolio managers categorized as value or growth style will have a scale of 1 f

#### Flashcard 1636536552716

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All [...] and [...] (measurement scales) data sets have an arithmetic mean.
interval

ratio

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Subject 4. Measures of Center Tendency
e assumed to refer to the arithmetic mean. The mean is the sum of all scores divided by the number of scores. It is used to measure the prospective (expected future) performance (return) of an investment over a number of periods. <span>All interval and ratio data sets (e.g., incomes, ages, rates of return) have an arithmetic mean. All data values are considered and included in the arithmetic mean computation. A data set has only one arithmetic mean. This indicates that the mean is unique. The arithmetic mean is t

#### Flashcard 1636549922060

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The arithmetic mean has the following disadvantages:

• The mean cannot be determined for [...]
an open-ended data set (i.e., n is unknown).

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Subject 4. Measures of Center Tendency
etic mean is the only measure of central tendency where the sum of the deviations of each value from the mean is always zero. Deviation from the arithmetic mean is the distance between the mean and an observation in the data set. <span>The arithmetic mean has the following disadvantages: The mean can be affected by extremes, that is, unusually large or small values. The mean cannot be determined for an open-ended data set (i.e., n is unknown). Geometric Mean The geometric mean has three important properties: It exists only if all the observations are greater th

#### Flashcard 1636824386828

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In a frequency distribution if too many intervals are used, [...]
we may not summarize enough.

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#### Parent (intermediate) annotation

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In a frequency distribution It is important to consider the number of intervals to be used. If too few intervals are used, too much data may be summarized and we may lose important characteristics; if too many intervals are used, we may not summarize enough.

#### Original toplevel document

Subject 3. Frequency Distributions
that: Each observation can only lie in one interval. The total number of intervals will incorporate the whole population. The range for an interval is unique. This means a value (observation) can only fall into one interval. <span>It is important to consider the number of intervals to be used. If too few intervals are used, too much data may be summarized and we may lose important characteristics; if too many intervals are used, we may not summarize enough. A frequency distribution is constructed by dividing the scores into intervals and counting the number of scores in each interval. The actual number of scores and the percent

#### Flashcard 1636826221836

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The following steps are required when organizing data into a frequency distribution.
• Identify [...].

• Setup classes (groups into which data is divided).

• Add up the number of observations and assign each observation to its class.

• Count the number of observations in each class.
the highest and lowest values of the observations

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#### Parent (intermediate) annotation

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The following steps are required when organizing data into a frequency distribution together with suggestions on constructing the frequency distribution. Identify the highest and lowest values of the observations. Setup classes (groups into which data is divided). The classes must be mutually exclusive and of equal size. Add up the number of observations and assign

#### Original toplevel document

Subject 3. Frequency Distributions
by the total number of observations. Cumulative absolute frequency and cumulative relative frequency are the results from cumulating the absolute and relative frequencies as we move from the first to the last interval. <span>The following steps are required when organizing data into a frequency distribution together with suggestions on constructing the frequency distribution. Identify the highest and lowest values of the observations. Setup classes (groups into which data is divided). The classes must be mutually exclusive and of equal size. Add up the number of observations and assign each observation to its class. Count the number of observations in each class. This is called the class frequency. Data can be divided into two types: discrete and continuous. Discrete: The values in the data set can be counted. There are distinct spaces between the values, such as

#### Flashcard 1636832251148

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The following steps are required when organizing data into a frequency distribution.
• Identify the highest and lowest values of the observations

• Setup classes (groups into which data is divided).

• Add up the number of observations and assign each observation to its class.

• [...]
Count the number of observations in each class.

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#### Parent (intermediate) annotation

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The following steps are required when organizing data into a frequency distribution together with suggestions on constructing the frequency distribution. Identify the highest and lowest values of the observations. Setup classes (groups into which data is divided). The classes must be mutually exclusive and of equal size. Add up the number of observations and assign

#### Original toplevel document

Subject 3. Frequency Distributions
by the total number of observations. Cumulative absolute frequency and cumulative relative frequency are the results from cumulating the absolute and relative frequencies as we move from the first to the last interval. <span>The following steps are required when organizing data into a frequency distribution together with suggestions on constructing the frequency distribution. Identify the highest and lowest values of the observations. Setup classes (groups into which data is divided). The classes must be mutually exclusive and of equal size. Add up the number of observations and assign each observation to its class. Count the number of observations in each class. This is called the class frequency. Data can be divided into two types: discrete and continuous. Discrete: The values in the data set can be counted. There are distinct spaces between the values, such as

#### Flashcard 1636861611276

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[...] is a quantity whose future outcomes are uncertain.

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#### Flashcard 1636867902732

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To save words, it is common to use [...] to represent a defined event.
a capital letter in italics

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#### Flashcard 1636871834892

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The two defining properties of a probability are as follows:

1. The probability of any event E is [...]

2. The sum of the probabilities of any set of mutually exclusive and exhaustive events equals 1.

a number between 0 and 1: 0 ≤ P(E) ≤ 1.

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#### Flashcard 1636873669900

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The two defining properties of a probability are as follows:

1. The probability of any event E is a number between 0 and 1: 0 ≤ P(E) ≤ 1.

2. The [...]

sum of the probabilities of any set of mutually exclusive and exhaustive events equals 1.

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#### Flashcard 1636875504908

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Covering or containing all possible outcomes.

Exhaustive

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#### Flashcard 1636877339916

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P followed by parentheses stands for [...]

the probability of (the event in parentheses)

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#### Flashcard 1637079452940

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In investments, we often estimate the probability of an event as a [...]

relative frequency of occurrence based on historical data.

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#### Flashcard 1637146299660

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Relationships must be stable through time for [...] to be accurate.

Empirical probabilities

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#### Flashcard 1637149969676

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Can we calculate a reliable empirical probability for a very rare event?

No

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#### Flashcard 1637151804684

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A probability drawing on personal judgment is called a [...]

Subjective probability

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#### Flashcard 1637155736844

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There are cases in which we have no empirical probability to use at all, then we would be making a [...]

Subjective probability

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#### Flashcard 1637208427788

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The probability in answer to the straightforward question “What is the probability of this event A?” is an [...]

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#### Flashcard 1637262429452

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To state an exact definition of conditional probability, we first need to introduce the concept of [...]
joint probability.

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#### Flashcard 1637264264460

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“What is the probability of both A and B happening?” The answer to this question is a [...]
joint probability.

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#### Flashcard 1637267934476

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the joint probability of A and B is the [...] .
sum of the probabilities of the outcomes they have in common

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#### Flashcard 1637556555020

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Given odds for E of “a to b,” the implied probability of E is [...]
a/(a + b).

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Odds

#### Flashcard 1644916772108

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To understand the meaning of a probability in investment contexts, we need to distinguish between two types of probability: [...]
unconditional and conditional.

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#### Annotation 1644918607116

 #reading-9-probability-concepts Suppose the question is “What is the probability that the stock earns a return above the risk-free rate (event A)?” The answer is an unconditional probability that can be viewed as the ratio of two quantities. The numerator is the sum of the probabilities of stock returns above the risk-free rate. Suppose that sum is 0.70. The denominator is 1, the sum of the probabilities of all possible returns. The answer to the question is P(A) = 0.70.

#### Flashcard 1644920442124

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“What is the probability of this event A?” is an [...]

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#### Flashcard 1644922277132

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Unconditional probability is also frequently referred to as [...]
marginal probability.​​​​​​​

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#### Flashcard 1644924898572

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The denominator in an unconditional probability is [...]
1

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#### Flashcard 1644926733580

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The denominator in an conditional probability is [...] of the event that conditions it.
the sum of the probabilities for all outcomes

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#### Flashcard 1644928830732

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“What is the probability of A, given that B has occurred?” The probability in answer to this last question is a [...]

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#### Annotation 1644930665740

 #reading-9-probability-concepts Given additional information on company characteristics, could an investor refine that estimate? Investors continually seek an information edge that will help improve their forecasts. In mathematical terms, they are attempting to frame their view of the future using probabilities conditioned on relevant information or events.

#### Flashcard 1644932500748

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To state an exact definition of conditional probability, we first need to introduce the concept of [...]
joint probability.

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#### Flashcard 1644934860044

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“What is the probability of both A and B happening?” The answer to this question is a [...]
joint probability.

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#### Flashcard 1644936695052

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[...] (read: “the probability of A and B”)
P(AB)

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#### Flashcard 1644938530060

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The joint probability of A and B is the [...]
sum of the probabilities of the outcomes they have in common.

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#### Flashcard 1644969200908

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The class width is from the [...] to the [...] limit
lower class limit

lower class

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#### Flashcard 1644971822348

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The [...] for every class is the smallest value in that class.
lower limit

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#### Flashcard 1644973657356

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The [...] for every class is the greatest value possible in that class.
upper limit

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#### Flashcard 1644975492364

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Class boundaries are the [...]
numbers used to separate classes.

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#### Flashcard 1644977589516

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The size of the gap between classes is the difference between the [...] of one class and the [...] class.
upper class limit

lower class limit of the next

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#### Flashcard 1644979424524

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The lower boundary of each class is calculated by [...]
the class lower limit minus 1/2 of the gap value.

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#### Flashcard 1644981259532

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The upper boundary of each class is calculated by [...]
adding half of the gap value to the class upper limit.

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#### Flashcard 1644983880972

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A [...] is the midpoint between two class limits
class boundary

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#### Flashcard 1644986240268

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Can you tell the maximum and minimun value from observing a frequency distribution?
Fuck no

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Article 1644992269580

Stem-and-leaf graph
#math-shit

A stem-and-leaf graph, also called a stemplot, is a way to represent the distribution of numeric data. It was invented by John Tukey, a mathematician, and is a quick way to picture data for numbers that are greater than 0. I'll explain using an example. Suppose you have the following set of numbers (they might represent the number of home runs hit by a major league baseball player during his career). 32, 33, 21, 45, 58, 20, 33, 44, 28, 15, 18, 25 The stem of a stemplot can have as many digits as needed, but the leaves should contain only one digit. To create a stemplot to display the above data, you must first create the stem. Since all of the numbers have just two digits, start by arranging the tens digits from smallest to largest. To create the leaves, draw a vertical bar after each of the tens digits and arrange the ones digits from each number in the data set in order from smallest to largest. If there are duplicate numbers, like 33, list each one. 1|58 2|0158

#### Annotation 1644993580300

 #math-shit A stem-and-leaf graph, also called a stemplot, is a way to represent the distribution of numeric data. It was invented by John Tukey, a mathematician, and is a quick way to picture data for numbers that are greater than 0.

Stem-and-leaf graph
A stem-and-leaf graph, also called a stemplot, is a way to represent the distribution of numeric data. It was invented by John Tukey, a mathematician, and is a quick way to picture data for numbers that are greater than 0. I'll explain using an example. Suppose you have the following set of numbers (they might represent the number of home runs hit by a major league baseball player during

#### Annotation 1644995153164

 #math-shit The stem of a stemplot can have as many digits as needed, but the leaves should contain only one digit.

Stem-and-leaf graph
Suppose you have the following set of numbers (they might represent the number of home runs hit by a major league baseball player during his career). 32, 33, 21, 45, 58, 20, 33, 44, 28, 15, 18, 25 <span>The stem of a stemplot can have as many digits as needed, but the leaves should contain only one digit. To create a stemplot to display the above data, you must first create the stem. Since all of the numbers have just two digits, start by arranging the tens digits from

#### Flashcard 1644996726028

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#math-shit
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You can find the median by [...] of the stemplot until [...]
counting from either end

you find its center.

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Stem-and-leaf graph
2|0158 3|233 4|45 5|8 The shape of the resulting display looks something like a bar graph oriented vertically. By examining the stemplot, you can determine certain properties of the data. <span>You can find the median by counting from either end of the stemplot until you find its center. Here, since there are 12 numbers, the center lies between 28 and 32. The median is the average of the two data points: (28+32)/2 = 30.) You can also determine if

#### Flashcard 1645005114636

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#analysts-questions
Question
To find quantiles in a frequency distribution you have to know [...]