Key Terms
CORE CONCEPT
R is free, open-source, and widely used in finance. The exam expects you to recognize basic commands.
Sample mean formula
X-bar = (sum of all x values) / n
Example
Seq(1, 5, by=0.5)
Formula
E(R) = P1*R1 + P2*R2 + P3*R3 + ... + Pn*Rn
Finance application
Average cost per share when buying stock at different prices on different dates.
Sample standard deviation formula (s)
S = square root of [ (sum of (x - x-bar)^2) / (n - 1) ]
Population standard deviation formula (sigma)
Sigma = square root of [ (sum of (x - mu)^2) / N ]
Step-by-step for sample SD
1. Find the mean 2.
Sample variance
S^2 = (sum of (x - x-bar)^2) / (n - 1) Population variance: sigma^2 = (sum of (x - mu)^2) / N
Percentile
The percentage of values at or below a given point.
Quartiles
Special percentiles that divide data into four equal parts.
To find quartiles
1. Order data from smallest to largest 2.
Lower bound
Q1 - (1.5 * IQR) Upper bound: Q3 + (1.5 * IQR)
Class width formula
(max value - min value) / number of classes Round up to the next whole number for integer data.
Steps to build one
1. Calculate class width 2.