# on 18-Dec-2018 (Tue)

#### Flashcard 1464617798924

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#conversation-tactics
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Chapter 9. How to deflect [...]
and roll with the punches.

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#### Parent (intermediate) annotation

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Chapter 9. How to deflect and roll with the punches.

#### Original toplevel document (pdf)

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#### Flashcard 1480013778188

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#power-of-habit
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What happened to the rats brain the first time it needed to find the cheese?
All kinds of places in the brain fired up specially the basal ganglia

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#### Flashcard 1603697511692

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#excel-stuff
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Cual es la formula para un hipervinculo a una hoja en el mismo libro?
# 'El nombre de la hoja' !A1

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#### Flashcard 1621034405132

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#cashflow-statement
Question
FCF accounts for [...] and dividend payments, which are essential to the ongoing nature of the business.
capital expenditures

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Subject 3. Cash Flow Statement Analysis
CFO. 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. <span>It accounts for capital expenditures and dividend payments, which are essential to the ongoing nature of the business. The basic definition is cash from operations less the amount of capital expenditures required to maintain the company's present productive capacity. &#

#### Flashcard 1621041483020

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#cashflow-statement
Question
[...]: Cash available to shareholders and bondholders after taxes, capital investment, and WC investment.
Free Cash Flow to the Firm (FCFF)

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Subject 3. Cash Flow Statement Analysis
3; The basic definition is cash from operations less the amount of capital expenditures required to maintain the company's present productive capacity. Free cash flow = CFO - capital expenditure <span>Free Cash Flow to the Firm (FCFF): Cash available to shareholders and bondholders after taxes, capital investment, and WC investment. FCFF = NI + NCC + Int (1 - Tax rate) - FCInv - WCInv NI: Net income available to common shareholders. It is the com

#### Flashcard 1621274529036

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#cashflow-statement
Question
The add-back of net non-cash expenses is usually positive or negative?
Positive

because depreciation is a major part of total expenses for most companies.

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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 1621276364044

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#cashflow-statement
Question
The add-back of net non-cash expenses is usually positive because [...]
depreciation is a major part of total expenses for most companies.

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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 1621291830540

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Question
Why is money worth more today than in the future?
This is because the $1 today can be invested to earn interest immediately. status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates The time value of money (TVM) refers to the fact that$1 today is worth more than $1 in the future. This is because the$1 today can be invested to earn interest immediately. The TVM reflects the relationship between present value, future value, time, and interest rate. The time value of money underlies rates of return, interest rates, required rates of retu

#### Flashcard 1621294189836

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Question
The TVM reflects the relationship between [...] , future value, time, and [...] .
present value

interest rate

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Subject 1 Time Value of Money and Interest Rates
The time value of money (TVM) refers to the fact that $1 today is worth more than$1 in the future. This is because the $1 today can be invested to earn interest immediately. The TVM reflects the relationship between present value, future value, time, and interest rate. The time value of money underlies rates of return, interest rates, required rates of return, discount rates, opportunity costs, inflation, and risk. It reflects the relationship between #### Flashcard 1621296549132 Tags #reading-6-time-value-of-money Question There are [...] ways to interpret interest rates Answer 3 status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates interest rate. The time value of money underlies rates of return, interest rates, required rates of return, discount rates, opportunity costs, inflation, and risk. It reflects the relationship between time, cash flow, and interest rate. <span>There are three ways to interpret interest rates: Required rate of return is the return required by investors or lenders to postpone their current consumption. Discount rate is the rate used to discount future cash flows #### Flashcard 1621298908428 Tags #reading-6-time-value-of-money Question [...] is the return required by investors or lenders to postpone their current consumption. Answer Required rate of return status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates n, interest rates, required rates of return, discount rates, opportunity costs, inflation, and risk. It reflects the relationship between time, cash flow, and interest rate. There are three ways to interpret interest rates: <span>Required rate of return is the return required by investors or lenders to postpone their current consumption. Discount rate is the rate used to discount future cash flows to allow for the time value of money (that is, to bring a future value equivalent to present value). Opportunity cost is the #### Flashcard 1621303627020 Tags #reading-6-time-value-of-money Question [...] is the most valuable alternative investors give up when they choose what to do with money. Answer Opportunity cost status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates e return required by investors or lenders to postpone their current consumption. Discount rate is the rate used to discount future cash flows to allow for the time value of money (that is, to bring a future value equivalent to present value). <span>Opportunity cost is the most valuable alternative investors give up when they choose what to do with money. In a certain world, the interest rate is called the risk-free rate. For investors preferring current to future consumption, the risk-free interest rate is the rate of compensation #### Flashcard 1621308345612 Tags #reading-6-time-value-of-money Question The [...] consists of the real rate (a pure rate of interest) and an inflation premium. Answer nominal cost of money status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates licate interest rates: Inflation: When prices are expected to increase, lenders charge not only an opportunity cost for postponing consumption but also an inflation premium that takes into account the expected increase in prices. <span>The nominal cost of money consists of the real rate (a pure rate of interest) and an inflation premium. Risk: Companies exhibit varying degrees of uncertainty concerning their ability to repay lenders. Lenders therefore charge interest rates that incorporate default #### Flashcard 1621317782796 Tags #reading-6-time-value-of-money Question [...] occurs when the number of compounding periods becomes infinite. Answer Continuous compounding status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates nominal risk-free rate (real rate + an inflation premium) and a default risk premium. Compounding is the process of accumulating interest over a period of time. A compounding period is the number of times per year that interest is paid. <span>Continuous compounding occurs when the number of compounding periods becomes infinite; interest is added continuously. Discounting is the calculation of the present value of some known future value. Discount rate is the rate used to calculate the present value of some future cash flow. Disco #### Flashcard 1621322501388 Tags #reading-6-time-value-of-money Question [...] is the rate used to calculate the present value of some future cash flow. Answer Discount rate status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates per year that interest is paid. Continuous compounding occurs when the number of compounding periods becomes infinite; interest is added continuously. Discounting is the calculation of the present value of some known future value. <span>Discount rate is the rate used to calculate the present value of some future cash flow. Discounted cash flow is the present value of some future cash flow. <span><body><html> #### Flashcard 1621324860684 Tags #reading-6-time-value-of-money Question [...] is the present value of some future cash flow. Answer Discounted cash flow status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates ding periods becomes infinite; interest is added continuously. Discounting is the calculation of the present value of some known future value. Discount rate is the rate used to calculate the present value of some future cash flow. <span>Discounted cash flow is the present value of some future cash flow. <span><body><html> #### Flashcard 1621957676300 Tags #reading-6-time-value-of-money Question Formula EAR = [...] Answer (1 + periodic interest rate)m - 1 status measured difficulty not learned 37% [default] 0 Subject 1 Time Value of Money and Interest Rates licate interest rates: Inflation: When prices are expected to increase, lenders charge not only an opportunity cost for postponing consumption but also an inflation premium that takes into account the expected increase in prices. <span>The nominal cost of money consists of the real rate (a pure rate of interest) and an inflation premium. Risk: Companies exhibit varying degrees of uncertainty concerning their ability to repay lenders. Lenders therefore charge interest rates that incorporate default #### Flashcard 1622917909772 Tags #discounted-cashflow-applications Question is the allocation of funds to relatively long-range projects or investments. Answer status measured difficulty not learned 37% [default] 0 #### Flashcard 1622919744780 Tags #discounted-cashflow-applications Question Management of a company’s short-term assets. status measured difficulty not learned 37% [default] 0 #### Flashcard 1622922366220 Tags #discounted-cashflow-applications Question The [...] of an investment is the present value of its cash inflows minus the present value of its cash outflows. Answer status measured difficulty not learned 37% [default] 0 #### Flashcard 1622938619148 Tags #discounted-cashflow-applications Question The discount rate that makes the present value of an investment’s costs equal to the present value of the investment’s benefits. Answer IRR status measured difficulty not learned 37% [default] 0 #### Flashcard 1622941502732 Tags #discounted-cashflow-applications Question What is the IRR rule? Answer Projects or investments for which the IRR is greater than the opportunity cost of capital should be accepted status measured difficulty not learned 37% [default] 0 #### Flashcard 1622943337740 Tags #discounted-cashflow-applications Question The IRR rule uses [...] as a hurdle rate Answer the opportunity cost of capital status measured difficulty not learned 37% [default] 0 #### Flashcard 1623556754700 Tags #discounted-cashflow-applications Question When the IRR and NPV rules conflict in ranking projects, we should take directions from [...] Answer the NPV rule. status measured difficulty not learned 37% [default] 0 #### Flashcard 1623560424716 Tags #discounted-cashflow-applications Question Why should we choose the NPV rule over the IRR rule when analyzing mutually exclusive projects? Answer The NPV of an investment represents the expected addition to shareholder wealth from an investment. status measured difficulty not learned 37% [default] 0 #### Flashcard 1623792160012 Tags #discounted-cashflow-applications Question The Money-Weighted rate of return is an [...] calculation. Answer internal rate of return status measured difficulty not learned 37% [default] 0 #### Flashcard 1623807888652 Tags #discounted-cashflow-applications Question In the United States, the money-weighted return is frequently called the [...] Answer dollar-weighted return. status measured difficulty not learned 37% [default] 0 #### Flashcard 1623815228684 Tags #discounted-cashflow-applications Question If you are an investor and you want to assess the success of your investments, which two tasks do you face? status measured difficulty not learned 37% [default] 0 #### Flashcard 1623818636556 Tags #discounted-cashflow-applications Question The calculation of returns in a logical and consistent manner is called [...] Answer status measured difficulty not learned 37% [default] 0 #### Flashcard 1623824403724 Tags #discounted-cashflow-applications Question Accurate performance measurement provides the basis for your second task, [...] . Answer status measured difficulty not learned 37% [default] 0 #### Flashcard 1623830695180 Tags #discounted-cashflow-applications Question The return that an investor earns during a specified holding period; a synonym for total return. Answer Holding period return status measured difficulty not learned 37% [default] 0 #### Flashcard 1623834103052 Tags #discounted-cashflow-applications Question HPR = [...] Answer (P1P0 + D1)/P0 status measured difficulty not learned 37% [default] 0 #### Flashcard 1623849307404 Tags #discounted-cashflow-applications Question Two of the measurement tools available for portfolio perfomance measure are the [...] measure and the [...] measure. Answer money-weighted rate of return time-weighted rate of return status measured difficulty not learned 37% [default] 0 #### Flashcard 1624281058572 Tags #discounted-cashflow-applications Question An investment measure that is not sensitive to the additions and withdrawals of funds is the [...] Answer time-weighted rate of return. status measured difficulty not learned 37% [default] 0 #### Flashcard 1624283155724 Tags #discounted-cashflow-applications Question What is the preferred performance measure in the investment management industry? Answer time-weighted rate of return status measured difficulty not learned 37% [default] 0 #### Flashcard 1624287350028 Tags #discounted-cashflow-applications Question The [...] rate of return is not affected by cash withdrawals or additions to the portfolio. status measured difficulty not learned 37% [default] 0 #### Flashcard 1624656448780 Tags #discounted-cashflow-applications Question The [...] is the market for short-term debt instruments (one-year maturity or less). Answer status measured difficulty not learned 37% [default] 0 #### Flashcard 1624658283788 Tags #discounted-cashflow-applications Question [...] pay interest as the difference between the amount borrowed and the amount paid back. status measured difficulty not learned 37% [default] 0 #### Flashcard 1624660380940 Tags #discounted-cashflow-applications Question The [...] of a T-bill is the amount the US government promises to pay back to a T-bill investor. Answer status measured difficulty not learned 37% [default] 0 #### Flashcard 1626637208844 Tags #reading-7-discounted-cashflows-applications Question The IRR assumes that all project cash flows can be reinvested to earn [...] Answer a rate of return exactly equal to the IRR itself. status measured difficulty not learned 37% [default] 0 Subject 1. NPV and IRR le. Reinvestment The IRR is intended to provide a single number that represents the rate of return generated by a capital investment. As such, it is an easy number to interpret and understand. However, calculation of <span>the IRR assumes that all project cash flows can be reinvested to earn a rate of return exactly equal to the IRR itself. In other words, a project with an IRR of 6% assumes that all cash flows can be reinvested to earn exactly 6%. If the cash flows are invested at a rate lower than 6%, the realized return #### Flashcard 1626644286732 Tags #reading-7-discounted-cashflows-applications Question Why is Timing of cashflows an issue with IRR? Answer Since IRR supposes the reinvestment of the funds at the same rate the distance between cashflows can make a substantial difference status measured difficulty not learned 37% [default] 0 Subject 1. NPV and IRR usive projects of greatly differing scale: one that requires a relatively small investment and returns relatively small cash flows, and another that requires a much larger investment and returns much larger cash flows. <span>Timing The other situation in which IRR is likely to contradict NPV is when there are two mutually-exclusive projects whose cash flows are timed very differently: one that receives its #### Flashcard 1626650053900 Tags #reading-7-discounted-cashflows-applications Question When analyzing rates of return, our starting point is the [...] Answer holding period return (HPR). status measured difficulty not learned 37% [default] 0 Subject 2. Holding Period Return When analyzing rates of return, our starting point 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: #### Flashcard 1626652413196 Tags #reading-7-discounted-cashflows-applications Question Holding period return (HPR) is also called... Answer total return, or status measured difficulty not learned 37% [default] 0 Subject 2. Holding Period Return When analyzing rates of return, our starting point 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: #### Flashcard 1626654772492 Tags #reading-7-discounted-cashflows-applications Question [...] measures the total return for holding an investment over a certain period of time Answer HPR status measured difficulty not learned 37% [default] 0 Subject 2. Holding Period Return When analyzing rates of return, our starting point 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: P t = price per share at the end of time period t P (t-1) = price per share at the #### Flashcard 1626657131788 Tags #has-images #reading-7-discounted-cashflows-applications Question Holding period return formula Answer status measured difficulty not learned 37% [default] 0 Subject 2. Holding Period Return When analyzing rates of return, our starting point 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: 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 #### Flashcard 1631884021004 Tags #reading-7-discounted-cashflows-applications Question The dollar-weighted rate of return is essentially the [...] on a portfolio. Answer internal rate of return (IRR) status measured difficulty not learned 37% [default] 0 Subject 3. Dollar-weighted and Time-weighted Rates of Return The dollar-weighted rate of return is essentially the internal rate of return (IRR) on a portfolio. This approach considers the timing and amountof cash flows. It is affected by the timing of cash flows. If funds are added to a portfolio when the portfolio is performing well (poorly), #### Flashcard 1631928585484 Tags #reading-7-discounted-cashflows-applications Question The time-weighted rate of return measures the [...] of$1 initial investment over the measurement period.
compound growth rate

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Subject 3. Dollar-weighted and Time-weighted Rates of Return

#### Flashcard 1646652427532

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Question
P (A or B) means the probability of [...] or [...]
either one event can occur

both events can occur.

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#### Parent (intermediate) annotation

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If we have two events, A and B, that we are interested in, we often want to know the probability that either A or B occurs. Note the use of the word "or," the key to this rule. The "or" is what we call an "inclusive or." In other words, either one event can occur or both events can occur.

#### Original toplevel document

Subject 3. Addition Rule for Probabilities: the Probability that at Least One of Two Events Will Occur
If we have two events, A and B, that we are interested in, we often want to know the probability that either A or B occurs. Note the use of the word "or," the key to this rule. The "or" is what we call an "inclusive or." In other words, either one event can occur or both events can occur. Such probabilities are calculated using the addition rule for probabilities. P(A or B) = P(A) + P(B) - P(AB) The logic behind this f

#### Flashcard 1646894386444

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Question
Covariance of returns is 0 if [...]
returns on the assets are unrelated.

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Subject 7. Covariance and Correlation
Facts about covariance: Covariance of returns is negative if, when the return on one asset is above its expected value, the return on the other asset is below its expected value (an average inverse relationship between returns). <span>Covariance of returns is 0 if returns on the assets are unrelated. Covariance of returns is positive if, when the return on one asset is above its expected value, the return on the other asset is above its expected value (an average positive relationsh

#### Flashcard 1646896745740

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Question
Covariance of returns is [...] if, when the return on one asset is above its expected value, the return on the other asset is above its expected value.
positive

(an average positive relationship between returns).

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Subject 7. Covariance and Correlation
tive if, when the return on one asset is above its expected value, the return on the other asset is below its expected value (an average inverse relationship between returns). Covariance of returns is 0 if returns on the assets are unrelated. <span>Covariance of returns is positive if, when the return on one asset is above its expected value, the return on the other asset is above its expected value (an average positive relationship between returns). The covariance of a random variable with itself (own covariance) is its own variance. Example Suppose that the future short-term outlook for the economy is favorable w

#### Flashcard 1646899105036

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Question
The covariance of a random variable with itself (own covariance) is [...]
its own variance.

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Subject 7. Covariance and Correlation
returns on the assets are unrelated. Covariance of returns is positive if, when the return on one asset is above its expected value, the return on the other asset is above its expected value (an average positive relationship between returns). <span>The covariance of a random variable with itself (own covariance) is its own variance. Example Suppose that the future short-term outlook for the economy is favorable with a probability 0.6 and unfavorable with a probability of 0.4. For two stocks, F and

#### Flashcard 1646905396492

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Correlation is a number between [...]
-1 and +1.

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Subject 7. Covariance and Correlation
where. The correlation between two random variables, R i and R j , is defined as: Alternative notations are corr(R i , R j ) and ρ ij . Properties of correlation: <span>Correlation is a number between -1 and +1. A correlation of 0 indicates an absence of any linear (straight-line) relationship between the variables. Increasingly positive correlation indicates an increasingly strong positive lin

#### Flashcard 1646907755788

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A correlation of [...] indicates an absence of any linear (straight-line) relationship between the variables.
0

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Subject 7. Covariance and Correlation
two random variables, R i and R j , is defined as: Alternative notations are corr(R i , R j ) and ρ ij . Properties of correlation: Correlation is a number between -1 and +1. <span>A correlation of 0 indicates an absence of any linear (straight-line) relationship between the variables. Increasingly positive correlation indicates an increasingly strong positive linear relationship (up to 1, which indicates a perfect linear relationship). Increasingly negative correlati

#### Flashcard 1646910115084

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Question
Increasingly positive correlation indicates an [...]
increasingly strong positive linear relationship

(up to 1, which indicates a perfect linear relationship)

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Subject 7. Covariance and Correlation
otations are corr(R i , R j ) and ρ ij . Properties of correlation: Correlation is a number between -1 and +1. A correlation of 0 indicates an absence of any linear (straight-line) relationship between the variables. <span>Increasingly positive correlation indicates an increasingly strong positive linear relationship (up to 1, which indicates a perfect linear relationship). Increasingly negative correlation indicates an increasingly strong negative linear relationship (down to -1, which indicates a perfect inverse linear relationship). The correlati

#### Flashcard 1646945766668

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Question
If A and B are mutually exclusive P(A or B) = [...]
P(A) + P(B).

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#### Flashcard 1647708343564

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A rule explaining the unconditional probability of an event in terms of probabilities of the event conditional on mutually exclusive and exhaustive scenarios.
Total probability rule

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#### Flashcard 1647713848588

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P(A) = P(AS)+P(ASC) = P(A|S)P(S) + P(A|SC)P(SC)
Total probability rule

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#### Flashcard 1647723810060

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The scenarios for the total probability rule must be [...]
mutually exclusive and exhaustive

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#### Flashcard 1647743470860

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The probability-weighted average of the possible outcomes of a random variable.
Expected value

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#### Flashcard 1647772044556

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The two notations for variance are [...]
σ2(X) and Var(X).

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#### Flashcard 1647782792460

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The order of calculation is always [...] , then [...] , then standard deviation.
expected value

variance

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#### Flashcard 1647821851916

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Question
Total probability rule for expected value:

E(X)= [...]
E(X)=E(X|S)P(S)+E(X|SC)P(SC)

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#### Flashcard 1647829191948

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so small or unimportant as to be not worth considering; insignificant.
Negligible

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#### Flashcard 1647852522764

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A diagram with branches emanating from nodes representing either mutually exclusive chance events or mutually exclusive decisions.
Tree diagram

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#### Flashcard 1648670936332

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Covariances are often presented in a square format called a [...]

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#### Flashcard 1648900574476

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Probabilities reflecting beliefs prior to the arrival of new information.
Prior probabilities

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#### Flashcard 1648906341644

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The probability of an observation, given a particular set of conditions.
Likelihood

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#### Flashcard 1648995994892

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[...] =n(n−1)(n−2)(n−3)…1
n!

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#### Flashcard 1652129402124

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A listing in which the order DOES matter is known as a [...]
permutation

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Subject 10. Principles of Counting
(The combination formula, or the binomial formula): For example, if you select two of the ten stocks you are analyzing, how many ways can you select the stocks? 10! / [(10 - 2)! x 2!] = 45. <span>An ordered listing is known as a permutation, and the formula that counts the number of permutations is known as the permutation formula. The number of ways that we can choose r objects from a total of n objects, where the order i

#### Flashcard 1652316048652

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Regarding counting, there can never be more [...] than [...] for the same problem.
combinations

permutations

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#### Parent (intermediate) annotation

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Regarding counting, there can never be more combinations than permutations for the same problem, because permutations take into account all possible orderings of items, whereas combinations do not.

#### Original toplevel document

Subject 10. Principles of Counting
he ten stocks you are analyzing and invest $10,000 in one stock and$20,000 in another stock, how many ways can you select the stocks? Note that the order of your selection is important in this case. 10 P 2 = 10!/(10 - 2)! = 90 <span>Note that there can never be more combinations than permutations for the same problem, because permutations take into account all possible orderings of items, whereas combinations do not. <span><body><html>

#### Flashcard 1652332039436

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the [...] between two random variables is the probability-weighted average of the cross-products of each random variable’s deviation from its own expected value.

covariance

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the covariance between two random variables is the probability-weighted average of the cross-products of each random variable’s deviation from its own expected value.

#### Flashcard 1652360350988

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The word marginal in economics roughly means [...]
incremental

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l>In analyses of probabilities presented in tables, unconditional probabilities usually appear at the ends or margins of the table, hence the term marginal probability. Because of possible confusion with the way marginal is used in economics (roughly meaning incremental), we use the term unconditional probability throughout this discussion.<html>

#### Flashcard 1652366642444

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If we know both the set of all the distinct possible outcomes of a random variable and the assignment of probabilities to those outcomes then we have the [...] of the random variable.
the probability distribution

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If we know both the set of all the distinct possible outcomes of a random variable and the assignment of probabilities to those outcomes—the probability distribution of the random variable—we have a complete description of the random variable, and we can assign a probability to any event that we might describe

#### Flashcard 1652376866060

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The multinomial formula with two different labels (k = 2) is called the [...]
combination formula or binominal formula

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Multinominal formula
A mutual fund guide ranked 18 bond mutual funds by total returns for the year 2014. The guide also assigned each fund one of five risk labels: high risk (four funds), above-average risk (four funds), average risk (t

#### Flashcard 3663972142348

Question
[default - edit me]
When you connect two or more computers in a network, each computer becomes more useful. There’s a rule that describes this, called Metcalfe’s Law. Robert Metcalfe was the original designer of the Ethernet structure used in most modern computer networks; his law states that the value (or power) of a network increases in proportion to the square of the number of devices connected to that network. The math is pretty subjective, but Metcalfe’s Law says that two computers connected together are about 4 times as useful as a single computer; if you connect 10 computers, the network is 100 times more powerful, and so forth.

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#### Annotation 3663973715212

 Two or more objects, or nodes, that use the network to connect them

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#### Annotation 3663975288076

 A set of communication channels that carry something—speech, TV shows, computer data—between or among nodes

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#### Annotation 3663976860940

 A set of rules that controls network traffic—on a highway, the rules might specify that vehicles drive on the right and pass on the left, and every car and truck must display a license plate to identify it; in a tele- phone network, the rules define the form and use of unique numbers (called “telephone numbers”) to identify each node and establish con- nections between them. To assure that a network operates properly, every node and every channel must follow the rules for that particular network.

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#### Annotation 3663978433804

 In a data network, the speed of a network is usually shown in millions of bits (or megabits) per second (Mbps)

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#### Annotation 3663980006668

 Never underestimate the bandwidth of a station wagon full of floppy disks.

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#### Annotation 3663981579532

 Depending on the data transfer speed and the network’s specific requirements, the computer might use a parallel port, a serial port, an Ethernet port, a USB or FireWire port, or a Wi-Fi antenna.

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#### Annotation 3663983152396

 Because these connectors and antennas move data in both directions, they are input/output ports or I/O ports, but that term is more often used to describe the computer’s serial and parallel data connectors

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#### Annotation 3663984725260

 A well-designed file-sharing system allows each user to set every file or folder as either “public” or “private.”

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#### Annotation 3663986298124

 your Internet service terminates in just one place, most often in a piece of electronic equipment called a modem (that’s geek-speak for modulator/demodulator, a device that converts between computer data and some other type of communications signal)

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#### Annotation 3663987870988

 When you spend that extra money for a DSL or cable Internet link (or fiber optic link), you want easy access to the Internet from every computer in the house. When you connect your network to the modem through a gateway router (shown in Figure 1-2), you can reach the Internet through any computer on that network.

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#### Annotation 3663989443852

 Within a home or small office network, you can use instant messaging, with or without sound and pictures, to communicate from one room to another. It might be a simple message, such as “Dinner’s ready,” or a more complicated request for information from someone else in the building. And of course, if there are young people in the house, the instant message program will quickly become a channel for gossip and idle conversation.

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#### Annotation 3663991016716

 A network printer can either connect directly to the network as a separate node (a printer server) or through one of the network’s computers.

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#### Annotation 3663992589580

 A stand-alone video camera (often with a built-in microphone) connected to your home network can have several uses. You can place a camera at the front door to identify visitors, or use one in a nursery or playroom to keep an eye on your children from computers in other parts of the house. Other devices can use special sensors to detect smoke and fires, unlocked or open doors and windows, broken glass, or flooding and other problems and send alerts to the homeowner on a local computer or to a home protection service through the Internet. Combined with a wireless network link, the same kind of security moni- toring can extend to a detached garage, shed, or other separate buildings, even if the house’s wired network does not reach those locations. Chapter 15 explains how to connect and use cameras and other security devices to your network.

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#### Annotation 3663994162444

 Home automation systems usually use separate wiring from a household data network, but sometimes they’re closely integrated. Home automation can be as simple as turning on outside lights after the sun goes down, or as com- plex as opening and closing drapes, monitoring and adjusting heating and air conditioning, operating a lawn sprinkler, or filling the dog’s water dish. You can also expect the next generation of “smart” kitchen and laundry appliances to include network connections that will allow them to let you know when the roast is cooked or the clothes dryer has completed its fluff cycle.

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#### Annotation 3663995735308

 Individual bits only offer two options, so they’re not particularly useful, but when you string eight of them together (into a byte), you can have 256 different combinations (2 × 2 × 2 × 2 × 2 × 2 × 2 × 2). That’s enough to assign a different sequence to every letter of the alphabet (both upper- and lowercase), the ten digits from 0 to 9, spaces between words, and other symbols such as punctuation marks and many letters used in foreign alphabets

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#### Annotation 3663997308172

 The most widely used coding system for converting bytes to characters is called ASCII (American Standard Code for Information Interchange).

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#### Annotation 3663998881036

 For example, it can divide every second of sound from a microphone or an analog recording into thousands of very short segments and use 16 or 24 bits to specify the content of each segment, or divide a picture into millions of individual points (called pixels, short for picture elements) and use a series of bits to specify the color of each bit

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#### Annotation 3664000453900

 And when you’re using existing circuits such as telephone lines, you don’t have any choice; you must find a way to send one bit at a time, with some additional bits and pauses that identify the beginning of each new byte. This is a serial data communications channel, because you’re sending the bits one after another.

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#### Annotation 3664002026764

 you must have a way to convert the text or other output of the computer to the signals used by the transmission medium, and to convert the same signals back again at the other end

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#### Annotation 3664003599628

 Communication over a direct physical connection (such as a wire) between a single origin and destination doesn’t need any kind of address or routing information to tell a message where to go.

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#### Annotation 3664005172492

 This kind of connection is great for voice and for simple data links, but it’s not particularly efficient for digital data on a complex net- work that serves many origins and destinations, because a single connection ties up the circuit all the time, even when no data is moving through the channel. The alternative is to send your message to a switching center that will hold it until a link to the destination becomes available. This is known as a store and forward system.

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#### Annotation 3664006745356

 To make the network even more efficient, you can divide messages that are longer than some arbitrary limit into separate pieces, called packets or frames. Packets from more than one message can alternate with packets containing other messages as they travel between switching centers, and reassemble themselves into the original messages at the destination.

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#### Annotation 3664008318220

 The packets from a single message might alternate with packets from one or more other messages as they move through parts of the network. For example, if you send a message to a recip- ient in another city, the packets usually move through an inter-city channel along with many other messages.

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#### Annotation 3664009891084

 Each data packet must also contain yet another set of information: the address of the packet’s destination, the sequence order of this packet relative to other packets in the original transmission, and so forth.

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#### Annotation 3664011463948

 The headers (at the beginning of a packet) and trailers (at the end of a packet) attached to each packet include the address of the packet’s desti- nation, information that allows the recipient to confirm that the packet’s content is accurate, and information that the recipient uses to reassemble the packets in the original order. Between the origin and the destination, network routing equipment sometimes adds more headers or trailers that contain routing instructions and other administrative information

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#### Annotation 3664013036812

 network adds and removes headers and trailers at different stages of a communication session.

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#### Annotation 3664014609676

 Each layer may attach additional information to the original message and strip off that information after it has done whatever the added information instructed it to do

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#### Annotation 3664016182540

 contain the content of the message, followed by an error-checking sequence, is called a frame.

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#### Annotation 3664017755404

 Both wired and wireless networks divide the data stream into frames that contain various forms of handshaking information along with the original data.

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#### Annotation 3664019328268

 The network deals with packets and frames at different places during the process of transmitting data. Fortunately, this all happens automatically, so you (as a network user) don’t have to worry about adding or removing them by hand.

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#### Annotation 3664024046860

 Therefore, your data stream must include a process called error checking. Error checking is accomplished by adding some kind of standard information to each byte. In a simple computer data network, the handshaking informa- tion is called the parity bit, which tells the device receiving each byte whether the sum of the ones and zeroes inside the byte is odd or even. This value is called a checksum. If the receiving device discovers that the parity bit is not correct, it instructs the transmitter to send the same byte again.

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#### Annotation 3664025619724

 More complex networks, including wireless systems, include additional error-checking hand- shaking data with each string of data.

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#### Annotation 3664027192588

 First it has to warn the device at the other end that it is ready to send and make sure the intended recipient is ready to accept data. To accomplish this, a series of “handshaking” requests and answers must surround the actual data.

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#### Annotation 3664028765452

 it’s important to understand that not every bit that moves through a computer data network is part of the original block of information that arrived at the input computer. In a complex net- work such as a wireless data channel, as much as 40 percent or more of the transmitted data is handshaking and other overhead. It’s all essential, but every one of those bits increases the amount of time that the message needs to move through the network.

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#### Annotation 3664030338316

 Ethernet was introduced in the 1970s as a method for connecting multiple computers and related equipment in the same building. Ethernet offers several advantages: It’s fast, it’s extremely flexible, it’s relatively easy to install and use, and it’s inexpensive. It has become an industry standard supported by dozens of manufacturers, so you can use different brands of equipment in the same network. Today, more than 85 percent of all local area networks (LANs), including just about every modern home and office network, use some form of Ethernet to provide the physical connection between computers through twisted-pair cables, coaxial cables, or fiber optic cables

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#### Annotation 3664031911180

 One of Ethernet’s most important features is the method it uses to prevent conflicts among nodes, called Carrier Sense Multiple Access with Collision Detection (CSMA/CD). Every time a network node is ready to transmit a frame, it checks if another frame is already using the network; if the network is clear, the node sends the frame. But if the node detects that another frame is using the net- work (a condition called a collision), it waits a random period of time before it tries again. CSMA/CD is important because it allows a relatively large number of computers and other devices to operate through the same network without interference.

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#### Annotation 3664033484044

 There are many Ethernet specifications that cover different data transfer speeds and different kinds of cables and connectors. The ones you’re most likely to see in a small LAN include the following: 10Base-T: 10 Mbps through twisted-pair cables 100Base-T or Fast Ethernet: 100 Mbps through twisted-pair cables 1000Base-T or Gigabit Ethernet: 1000 Mbps through twisted-pair or fiber optic cables Wireless or Wi-Fi: any of several systems that use radio signals instead of wires—the latest 802.11n Wi-Fi networks can operate at speeds up to 70 Mbps

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#### Annotation 3664035056908

 A 10Base-T network is adequate for a small home network. It’s faster than most broadband Internet services, so it’s sufficient for handling the inbound and outbound data (including audio and video) that you exchange with the Internet. However, most new network ports, hubs, and switches can handle both 10Base-T and 100Base-T, so there’s very little point to limiting the network to the slower speed. 100Base-T will also allow you to move pictures, music, and videos and play multiplayer games within your own network much faster than a 10Base-T network, and it will not limit the speed of an 802.11n link. Considering the insignificant difference in cost, today’s 100Base-T networks are always a better choice than the older 10Base-T versions.

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#### Annotation 3664036629772

 If a 100Base-T network can’t handle 100 Mbps because of interference or some other problem, it will automatically drop down to 10Base-T.

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#### Annotation 3664038202636

 A 10Base-T device can work on a 100Base-T network, but it will force the whole network to drop down to 10 Mbps.

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#### Annotation 3664039775500

 You might also see the word Ethernet used to identify the connector on a computer, printer, or other network device that mates with an Ethernet cable to connect the device to a network. The instruction manual or the label on every piece of Ethernet-compatible equipment should tell you which type of connection it uses.

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#### Annotation 3664041348364

 Twisted-pair cables are bundles of wires in which each pair of wires is twisted together, as shown in Figure 2-3. Because data normally moves in only one direction through each pair of wires, a 10Base-T or 100Base-T network connection uses two pairs—one for each direction. The most common Ethernet cables include a total of eight wires in four color-coded wire pairs, so you can use the remaining wires as spares.

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#### Annotation 3664042921228

 Another name for Wi-Fi is wireless Ethernet, because Wi-Fi uses many of the same data-handling rules and specifications as a wired Ethernet network. However, every Wi-Fi packet must include additional handshaking data, so the overall data transfer speed is often slower than a conventional Ethernet link.

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#### Annotation 3664044494092

 In a powerline network, computer data moves through a building’s existing electric wiring. Each computer connects through a parallel port, a USB port, or an Ethernet port to a data adapter that plugs directly into an AC wall outlet. The same power transformer that feeds your house wiring also isolates your data network from your neighbors

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#### Annotation 3664046066956

 The most widely used standard for powerline networks is called HomePlug. The greatest advantage of HomePlug and other powerline networks is that the wires are already in place. Every AC wall socket in the house can double as a network connection point. It’s also more secure than Wi-Fi, and it can reach greater distances than a Wi-Fi network with just one base station. Wi-Fi signals are often blocked by thick walls and other obstacles that make no difference to a powerline system.

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#### Annotation 3664047639820

 You must plug all your powerline adapters directly into wall outlets. Surge protectors and powerline conditioners often absorb powerline network data, because they see the data as “noise” on the AC power voltage. Conversely, if you’re using a powerline net- work, you will want to connect your stereo or home theater system to power conditioners to filter out the noise produced by the network.

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#### Annotation 3664049212684

 Two more home networking methods are possible, but they’re almost always provided as supplements to other services. These systems use the internal telephone wiring that connects extension telephones in several rooms or the coaxial cable (coax) that provides cable TV signals.

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#### Annotation 3664050785548

 There’s one more concept that every network planner should understand: the difference between data terminal equipment (DTE) and data communications equipment or data circuit-terminating equipment (DCE)

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#### Annotation 3664052358412

 Data can move through a wire in only one direction. When a data link sends and receives signals at the same time, it must use separate wires to send data from the DTE to the DCE, and from the DCE to the DTE. Therefore, a network device uses separate inputs and outputs on the same multipin connector. The specific pin assignment is different in different connection types, but the inputs and outputs are always different pins or sockets.

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#### Annotation 3664053931276

 Therefore, when you connect two pieces of equipment, the outputs at each end must go to inputs at the other end. If Pin 2 on one device is an output, Pin 2 on the other device must be an input. Most standard data cables connect each connector pin to the same numbered pin at the other end, so connecting two devices through a cable is exactly the same as plugging one device directly into another.

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#### Annotation 3664055504140

 When you connect a terminal to a control device, the output pins on the DTE device connect to the input pins on the DCE device.