# Study Session 2: Quantitative Methods: Basic Concepts

## Linear Interpolation in bonds and quantiles - Texas BA II Plus

Hi! Is there any possibility to use linear interpolation from STAT function in bonds and quantiles practice problems?

## TVM problem with calculator

When it should be: N = 2; I/Y = 10; PV = –200; CPT → FV = $242 my calculator shows FV=231,5

Whats is wrong?

## Decision Trees - Std Deviation with BA II PLUS

How can I calculate this through BA II Plus? I know how to do this in steps but it takes too much time. I am calculating the Expected Value, then the Variance and then the Std Dev through the square root.

Exercise is:

The probability distribution for a company’s sales is:

**Probability****Sales ($ millions)**

0.05

70

0.70

40

0.25

25

**Q.** The standard deviation of sales is *closest *to:

1. 9.82 million

2. 12.20 million

## TVM Sign Convention

Hello guys

Using Kaplan 2018. In the example just before the “FV of Annuity Due” there’s a Note:

**PMT & FV must have the same sign. **

In a Professor’s note in Loan & Amortization it says:

## TVM Problem - Issue with the Wording

I came across this easy question that’s messing with me based on the wording of one part of it. Any helpers?

“A client can choose between receiving 10 annual $100,000 retirement payments, starting one year from today, or receiving a lump sum today. Knowing that he can invest at a rate of 5 percent annually, he has decided to take the lump sum. **What lump sum today will be equivalent to the future annual payments? “**

I highlighted that last bit because that’s the part that’s tripping me up. I know that the way to solve this with the calculator would be:

## Quant Probability Concepts Question

Two boxes contain chips of different colors. Whereas the first box has 45 red chips

and 55 blue chips, the second box contains 70 red chips and 30 blue chips. You pick

one chip from either of the boxes and it turns out to be blue. Given the facts above,

what is the probability that the blue chip you picked came from the second box

assuming that both boxes have the same probability of being chosen

Could someone help me with this question. I’m terrible at probability, just having a hard time in general understanding the concepts.

## Quant Statistical Concepts & Mkt Returns problem

An investor is using a screening program to select stocks. The first criterion is to limit

further analysis to the top quintile of companies with return on assets (ROA).

Ranking a database of 1,200 firms from lowest to highest ROA produced an array,

which is excerpted in the following table.

Rank

ROA

Rank

ROA

958

9.00%

962

10.30%

959

9.20%

963

10.60%

960

9.90%

964

10.70%

## TVM Question

A company’s annual sales figures over the last four years are as follows: $2.6 million;

$3.1 million, $5.3 million, $7.0 million. The firm’s compound annual growth rate over

the period is closest to

28%

39%

56%

The solution uses 3 years to calculate the growth rate and hence the answer is 39%

I’m not understanding why itsn’t 4 years. Could someone kindly explain this to me.

## Quant TVM problem

An investor is evaluating an insurance product that promises to pay a $1,000

monthly benefit for 20 years beginning 10 years from now. The investor is required

to make payments at the end of each month for the next five years. Assuming a five

percent discount rate and monthly compounding, the minimum monthly payment

required to finance the benefit is closest to:

$1,743

$1,912

$2,228

Could someone tell me their method of solving?

## TVM question - 2 interest rates in Question

Hello,

Q: Couple is saving for child’s tuition for 4 years starting 18 yrs from now. current annual cost of college is 7K, and is expected to rise at an annual rate of 5%. In planning, couple assumes they can earn 6% annually. How much must they put aside each year starting next year, if they plan to make 17 equal payments?

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