Bionic Turtle

[How-To: Practice Questions] P1.T2.213. Sample variance, covariance and correlation (Stock & Watson)

2012-02-10T14:33:12+00:00

AIMs: Define, calculate, and interpret the sample variance, sample standard deviation, and standard error. Define, describe, and interpret the sample covariance and correlation.

Questions:

213.1. Consider the following five (X,Y) data points: (1,5), (2,4), (3,3), (4,2), (5,1). What is the sample standard deviation of (X)?

0.97
1.58
2.00
2.50

213.2. What is the sample covariance of the following five (X,Y) data points: (1,5), (2,4), (3,3), (4,2), (5,1).

-4.00
-2.50
-1.50
-1.00

213.3. Let Y(i) be the sample set of seven (n = 7) observations: 2, 3, 5, 6, 9, 10, 11 and 13. What is the standard error of the sample average, SE(sample average Y)?

1.56
1.68
4.12
7.00

213.4. What is the sample correlation of the following five (X,Y) data points: (2,4), (3,1), (5,3), (7,7), (13,9)?

0.511
0.667
0.744
0.862

Answers:

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[How-To: Practice Questions] P2.T5.112. Cash flow yield of mortgage backed security (MBS)

2012-02-09T17:25:39+00:00

AIM: Calculate the static cash flow yield of a MBS using bond equivalent yield (BEY) and determine the associated nominal spread.

Questions:

112.1. If the bond-equivalent yield (BEY) of a mortgage-backed security (MBS) is 4.40%, what is the cash flow yield (a.k.a., mortgage yield)?

3.98%
4.36%
4.40%
4.44%

112.2. Assume the bond-equivalent (i.e., semi-annual) yield of the seven and 10-year Treasury securities are, respectively, 4.0% and 5.2%. The bond-equivalent for an mortgage-backed security (MBS) is 5.40%. The average life of the MBS is nine (9) years. Which is nearest to the nominal spread?

20 basis points
54 basis points
60 basis points
140 basis points

112.3. A pass-through mortgage-backed security (MBS) has a weighted average life of 15.0 years and a current price of $10 million. The balance fully amortizes with monthly payment of $95,000. Unrealistically, only to make the yield easy to retrieve, we assume no prepaid principal reduction; i.e., scheduled principal due to amortization is the only source of principal reduction. The bond-equivalent yields of, respectively the 10- and 20-year Treasury bonds are 2.0% and 2.8%. What is the nominal spread on the MBS?

4.94%
5.13%
5.50%
5.96%

Answers:

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[Career Guide: News & Articles] Reinventing Brands: Makeover Or Move Over

2012-02-08T22:18:40+00:00

Brands need to be treated like organic creatures that grow with constant nurturing. A brand's reputation stays strong only as long as it maintains the promises it makes with customers. These promises are usually the simplest: "I will make life easy for you;" "With me in your life, everything will be more fun" and "I will be there by your side, through good times and bad." How else can we explain the love of consumers for a particular brand of chips, jeans or online book store? Consumer needs change with time and brands today need to work extra hard at understanding and serving those customer needs, to generate value.

See: Advertising, Crocodiles And Moats

Apple

Companies sometimes need to reinvent brands by changing their value proposition, to encompass a whole new set of users. Apple Computers changed to Apple Inc., when it moved from being a computer company to a maker of gadgets such as the iPod, iPhone and iPad. In addition, Apple started marketing and distributing applications for its devices through its app store, as well as providing a platform to sell and play music for Apple users. All of Apple's products are now aimed at the ease of use and quality of customer interactions.

The Apple brand itself, during inception, was conceived by Steve Jobs to be "fun, spirited and not intimidating." This had resulted in Apple moving from a company that developed computers appreciated more by designers and intellectuals, to a company that develops multiple devices, desirable because they are portable, highly functional and high on design and beauty.

In 2011, Apple stood third on the FT Global 500 list, from its earlier number five position. Apple's brand value has changed 84% since 2010, and is valued at about $153,285 million, topping Google, IBM and Microsoft. (To learn more, see The Apple Ecosystem.)

McDonald's

One size doesn't fit all. This is especially true of brands entering new markets. McDonald's, the promise of American fast food anywhere in the world, has had to rethink and rebrand its offerings in different countries. While the golden arches and the clown Ronald McDonald are constant, McDonald's has had to change its menu. For example, in India, the menu has no beef dishes: there is the very popular McAloo Tikki, a potato-based patty in burger buns; the Big Mac is replaced by the Maharaja Mac, the Big Mac in chicken; there is also the paneer (cottage cheese) McVeggie burger. The Italian McDonald's also has a special espresso corner.

To celebrate its 20th anniversary in China, McDonald's rebranded under the "Make Room for Happiness" campaign; unlimited coffee refills, Wi-Fi and a more contemporary restaurant design were unveiled. This rebranding was especially for China, where McDonald's positioned itself as a place away from the everyday high expectations of Chinese life. Its "I'm Lovin' It" slogan made way for "Make Room for Happiness," and McDonald's became the place where the young over-worked Chinese population could relax and spend time with friends over coffee. The immediate impact of the rebranding exercise has seen an 18% increase in sales, and an increasing legion of fans that is fueling McDonald's' growth in China. (To learn more, see McDonald's: A History Of Innovation.)
What happens if a brand stays stagnant? It will slip, slide and finally die if it fails to remain relevant.

Sears and Kmart

Lack of care and attention to the unique selling proposition of the brand and not adapting to customer requirements, can see a brand falling by the wayside. Post-holiday season, Kmart and Sears are closing 120 of their stores. In a retail scenario where brands like Target and Wal-Mart are clearly identifying with customers and their needs, Sears chose to be laid back. Poor merchandise choices, unattractive store ambiance and with no clear brand positioning, Sears finds itself in a scenario with lower demand.

Competitors like Macy's, J.C. Penney and Target spent more money per store to engage customers, while Sears fell short, rendering the brand substandard. Retail stores are also facing heat from online stores, which are making shopping easier. If Sears does not buck up, it could see a wash out of its brand. (To learn more about Sears, see The History And Future Of Sears.)

Jack in the Box

In 1993, four children died after eating under-cooked meat at a Jack in the Box restaurant in Seattle, and more fell sick due to the E. Coli virus. The food chain lost millions and it looked like they would never be able to come out of the crisis.

In response, Jack in the Box recruited noted food research expert David Theo to come in and implement a safety check system. He implemented the Hazard Analysis Critical Control Points (HACCP) program, which checks for bacterial presence at several critical points. Food supplies from vendors were checked and dropped if bacteria were detected more than once. Cooking systems and samples were checked thoroughly, and the burger flip tongs were sanitized. These practices led to a strong culture of hygiene in the organization.

After totally changing its internal systems, Jack in the Box introduced the ping-pong faced CEO who made the brand irreverent and fun. The "Jack's Back" campaign shows the ping-pong mascot going about his CEO duties after being blown up. This allowed Jack in the Box to reach out to its target audience of young adults. In this case, rebranding helped the company not only come back into the market, but grow larger.

Kodak

In recent years, Kodak failed to capitalize on changes in society and technology, not keeping with its leadership role for product innovation. Kodak now seems irrelevant in the life cycle of modern photography, where the majority of photos are taken and uploaded with smartphones, and brands that have adapted to the growing market of semi-professional photography.

Kodak, however, did attempt to reinvent itself as a key player in the digital segment. It pitched itself as a diverse provider of state-of-the-art digital imaging products and services useful to many different industries. Kodak, unlike Canon and Nikon, did not build space in their hardware and technology. In the end, a superficial rebranding exercise without realignment of key connective points with customers, will weaken or wipe out the brand.

The Bottom Line

Brand reinvention is an exercise in introspection, where companies need to look closely if they are delivering on the promises they have made to consumers. They need to assess, reconsider their outlook and reorganize from the core. Even a little window dressing can go a long way. (For more information, see Getting To Know Business Models.)

[Career Guide: News & Articles] Biggest Industry Ups And Downs Of 2011

2012-02-08T21:50:11+00:00

2011 was an eventful year for the American economy, and it seems to be slowly getting back on track. The last few weeks of 2011 started seeing some positive activity in consumer spending. Banking is slowly recovering, as is the demand for cars. Employment opportunities have improved with unemployment down to 8.5%. However, it was a recession-hit year for the economy, with greater focus on creating higher consumption through greater government spending.

SEE: Consumer Spending As A Market Indicator

According to the Chief Financial Officer of Washington DC, Natwar Gandhi, "There is no consumer demand as we speak. The businesses are not investing, as they do not see any demand out there. So the only player who can really generate demand is government. The government needs to spend money. There is a need to spend money on our infrastructure, which is abysmal. Unless government spends money to generate demand, I see very likely a lost decade, the kind that the Japanese have experienced over the last 10 years."

Let's take a look at the industries that performed the best and the worst in the year 2011. We will keep the Standard and Poor's (S&P) index as the benchmark to understand the American economy better. This index covers about 500 large cap American companies, and is considered to be a good indicator of the American economy. Our analysis is based on the Select Sector SPDRs, which are ETFs that divide the S&P 500 into nine sector index funds. The following table provides a snapshot of how each of the industry funds performed during the year 2011.

Total Returns (Net Asset Value) as of Jan. 31, 2011

The Biggest Rises

As you can see, the four industries that significantly outperformed the S&P500 index are: utilities, consumer staples, healthcare, and consumer discretionary. (For additional reading, check out Is Your Portfolio Beating Its Benchmark?)

Let's take a brief look at each of these industries.

Utilities: These are the companies that produce, generate, transmit or distribute electricity or natural gas. Utilities sector was the star performer in 2011. The key factor driving growth in this sector is the increased demand of electricity. The utility stocks offer relative safety and stability, and this could have been the reason behind investor attraction, due to the global financial crisis and European debt woes.

Consumer Staples: This sector includes companies that are primarily involved in consumer products, food and beverages, retail drugs, fast moving consumer goods, household products and personal care. The Consumer Staples Select Sector SPDR Fund showed a 14% increase in the year 2011. This sector has a demand that is non-cyclical. The growth has been consistent, even though the year saw high fuel volatility, which pushed up the prices of food. (To learn more, read Cyclical Versus Non-Cyclical Stocks.)

Healthcare: This sector includes companies making healthcare equipment and supplies, healthcare providers and services, biotechnology and pharmaceuticals industries. Expenditure on healthcare is expected to reach 31% of GDP by 2035, according to the Congressional Budget Office. About 17% of the population is still uninsured; this is expected to come down to 5% if the government goes ahead with its proposed plans for healthcare. According to PricewaterhouseCoopers, the key drivers for growth in the healthcare sector have been consolidation of providers, increased demand for healthcare due to stress related-diseases and cost shifting from Medicare and Medi-aid.

Consumer Discretionary: This includes automobiles, consumer durables, apparel, hotels, media and retail industries. Renewed consumer confidence in the U.S. auto sector has seen it on a resurgent mode. U.S. light-vehicle deliveries climbed 10%, or about 1.19 million, to 12.8 million in 2011. It is expected to grow further in 2012. The stocks in the consumer discretionary sector have performed better than high investment sectors like construction. This sector does have some cyclical nature, but lowering unemployment rates mean the outlook for 2012 is also positive.

The Biggest Falls

The two industries that did worst in 2011 were: Financial and Materials.

Financials: This was the worst performing sector in 2011. The Financials Select Sector SPDR Fund dropped by as much as 17% during the year. In addition to the slowing economy, Basel III's stricter capital adequacy norms, stricter government regulations and high default by consumers all further put pressure on the financial sector. This was further compounded by the problems in Europe.

Materials: This sector includes companies in chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products. The sector saw a dip, as there was little to no demand for housing and infrastructure. Sluggish demand and increased cost of materials saw this sector facing a low. Global outlook of demand for materials is currently on the downside.

The Bottom Line

The other sectors - technology, industrials, and energy - showed little or no growth. All in all it was a lackluster year for the U.S. economy. The last quarter of 2011 saw demand slowly rising and unemployment levels falling, and the government is planning to invest in the system. The growth prediction for 2012 is 3%, slightly better than 0.9% growth of the first two quarters of 2011. Clearly, the improvements are coming in a trickle, but they are improvements nevertheless. (For more information on individual sectors, read The Industry Handbook.)

[How-To: Practice Questions] P1.T2.212. Difference between two means

2012-02-08T17:10:33+00:00

AIM: Perform and interpret hypothesis tests for the difference between two means.

Questions:

212.1. We want to decide whether the average arithmetic return of Fund A is better than the average return of Fund B: the null hypothesis is that the true average difference is zero. For both fund, our sample is 60 months. Over this sample, the average return of Fund A was 2.0% with a standard deviation of 3.0%; the average return of Fund B was only 1.0% with standard deviation of 2.0%. With 95% confidence, do we reject the null hypothesis (i.e., fail to accept) and decide that the average return of Fund A was truly better?

No, the t-statistic is only 0.465
No, the t-statistic is only 1.465
Yes, the t-statistic is 2.148
Yes, the t-statistic is 5.359

212.2. The average hourly earnings among a sample of 1,500 men is $22.00 with a sample standard deviation of $9.00. The average hourly earnings among a sample of 1,000 women is $20.00 with a sample standard deviation of $6.00. What is the 95% confidence interval for the (two-sided) difference in average earnings between men and women?

$0.04 to $3.96
$1.41 to $2.59
$1.70 to $2.30
$1.83 to $2.17

212.3. A credit rating agency wants to compare the difference in default rates between structured notes in two speculative rating categories: SF B versus SF CCC. The default rate among a sample of 1,800 SF B-rated obligors was 5.0%, compared to the default rate among a sample of 1,000 SF CCC-rated obligors was 8.0%. Default is characterized by a Bernoulli random variable. What is the 95% confidence interval for the difference in default rates?

2.97% to 3.04%
2.11% to 3.89%
1.75% to 4.25%
1.04% to 4.96%

Answers:

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[How-To: Practice Questions] P2.T5.111. MBS dollar roll

2012-02-07T19:02:13+00:00

AIMs: Explain a dollar roll transaction, how to value a dollar roll, and what factors can cause a roll to trade “special.” Relate the pricing of mortgage products to developments in MBS markets. Explain the purpose of cash flow structuring of mortgage backed securities.

Questions:

111.1. In the agency mortgage-backed security (MBS) market, the difference between the front month (i.e., an initial purchase price) and back month (i.e., a resale price) is the price of the dollar roll. The price of the dollar roll is an implied financing rate: the investor who buys the securities in the front month and then sells them in the back month is receiving collateral and loaning cash, in a manner similar to a repo transaction. For example, if the investor purchases securities at a price of $X, and receives $C during the roll period, then sells them back at $Y, the implied financing rate is (Y+C)/X - 1. The roll "trades special" if the financing rate is lower than (more favorable than) can be gotten in the repo market. Which of the following dynamics is LEAST LIKELY to cause the roll to trade special, or to even further lower the implied financing rate, EXCEPT for:

Heavy or increased issuance by originators in the back month pushing down the price for that settlement date
Stronger demand in the front month for deal collateral, pushing up the front month price
As the investor who buys the securities receives the principal and interest during the roll period, the investor incurs prepayment risk
Increased demand for mortgage-backed securities (MBS) from investor that prefer to have securities (as opposed to forward-settlement TBA transactions) on their books

111.2. With respect to the pricing of mortgage products, each of the following is true EXCEPT:

The most important (primary) influence on consumer mortgage rates, as with real estate, is supply and demand in local markets
As the loan note rate increases, the "points" charged should decrease; above a certain note rate, points will be rebated to borrower (a.k.a., negative points)
Consumer borrowing rates have become increasingly linked with capital market rates and flows
The calculation of the optimal MBS coupon for private (non-agency; e.g., jumbo) pool is conceptually similar to the approach for agency pools except for the lack of a guarantee fee (g-fee)

111.3. Which of the following is TRUE about the purposes of cash flow structuring of mortgage-backed securities?

Cash flow structuring reduces the total interest rate sensitivity (e.g., duration) in the pool
Cash flow structuring translates a pool's cash flows and risks into securities with different (various) cash flows and risk features
Cash flow structuring can minimize the impact of idiosyncratic risk by way of diversification
Cash flow structuring can generally convert a pool with less desirable loans into tranches that are all more desirable

Answers:

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[How-To: Practice Questions] P1.T2.211. Type I and II errors and p-value (Stock & Watson)

2012-02-06T18:59:58+00:00

AIM: Define, calculate and interpret type I and type II errors. Define and interpret the p-value.

Questions:

211.1. The Basel III market risk backtest requires a bank to observe the number of exceptions (aka, exceedences; the number of days on which the VaR loss was exceeded) in order to infer whether the bank's 99.0% 10-day value at risk (VaR) model is accurate. Even before the impossible task of prediction, the observed sample is making an inference about a historical population. The null hypothesis implicit in the Basel backtest is: H(0) = the VaR model is accurate with 99.0% confidence. Therefore, the alternative H(A) = VaR model is accurate with less than 99.0% confidence. Basel designed three "stoplight" zones to acknowledge the reality that sampling is a statistical test which is necessarily error-prone: A "Green Zone" outcome is when sufficiently few exceptions occur such that the decision should be to accept the model; a "Red Zone" outcome is when too many exceptions occur such that the decision is to reject the model as bad. Which of the following constitutes a Type II error?

A Red Zone outcome when the VaR model is 99.0% confident (i.e., gives 99.0% coverage)
A Green Zone outcome when the VaR model is, for example, only 97.0% confident
A Green Zone outcome when the VaR model is 99.0% confident
The Type II error cannot occur in the backtest

211.2. A sample of 144 has a sample mean of 112.9 with sample standard deviation of 60. The null hypothesis is that the true population mean is 100.0; the two-sided alternative hypothesis is that the true population mean is different than 100.0. What is the two-sided p-value?

0.5%
1.0%
2.5%
5.0%

211.3. Your colleague Mary believes that FRM scores are correlated with work experience. Somehow she got hold of data and produced a linear regression, FRMScore = intercept + slope*YearExperience, such that the p-value of the slope coefficient is 1.7% (0.017). Per common practice, the significance test starts with a null hypothesis that the slope is zero, and the two-sided alternative hypothesis is that the slope is non-zero. Which of the following is a correct interpretation of the p-value?

If her prespecified significance level is 1.0%, she rejects the null and deems the true slope to be non-zero
If her prespecified significance level is 5.0%, she rejects the null and deems the true slope to be non-zero
The probability that the slope is zero is 1.7%
The probability that the slope is non-zero is 98.3%

Answers:

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*[How-To: Notes] 2012.T5. Market

2012-02-04T12:57:15+00:00

*[How-To: Notes] 2012.T1. Foundations

2012-02-03T14:53:09+00:00

[How-To: Practice Questions] P2.T5.110. Agency and private-label mortgage-backed securities (MBS)

2012-02-03T12:03:13+00:00

AIMs: Describe the evolution of the MBS market. Explain the creation of agency (fixed rate and adjustable rate) and private-label MBS pools, pass-throughs, CMOs, and mortgage strips. Understand how a loan progresses from application to agency pooling. Discuss MBS market structure and the ways that fixed rate pass-through securities trade.

Questions:

110.1 An agency fixed-rate mortgage-backed security (MBS) is a pass-through pool that pays a 5.00% coupon to investors. One of the loans in the pool, among many others, carries a note rate of 5.75%; i.e., the note rate is 75 basis points higher than the coupon. Base (required) servicing is 25 basis points and the Guarantee Fee is 20 basis points. What is the amount of excess servicing on the loan?

Zero bps
30 basis points
75 basis points
125 basis points

110.2. With respect to the timeline of a mortgage loan and the structure of the MBS market, each of the following is true EXCEPT:

At application, the loan may carry a floating rate or, at a slightly higher cost, a designated ("locked" or "committed") rate
The pipeline includes the lag, generally 30 to 60 days, between application and funding
During the committed pipeline, after the rate has been locked, the lender incurs both price (i.e., interest rate) risk and fallout risk
Borrows who lock-in a designated rate tend to fall out, in greater numbers, if interest rates increase during the committed pipeline

110.3. In the private-label securitization market, which of the following most nearly substitutes for the guarantee fee (g-fee) in the agency market?

Subordination, shifting interest and overcollateralization (O/C)
Mortgage servicing rights (MSR)
Base plus excess servicing rates
Private-label market also has g-fees

Answers:

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[How-To: Practice Questions] P1.T2.210. Hypothesis testing (Stock & Watson)

2012-02-02T18:36:31+00:00

AIMs: Explain and apply the process of hypothesis testing: Define and interpret the null hypothesis and the alternative hypothesis; Distinguish between one‐sided and two‐sided hypotheses; Describe the confidence interval approach to hypothesis testing; Describe the test of significance approach to hypothesis testing.

Questions:

210.1. Your colleague Robert wants to conduct a statistical test to determine whether hedge funds create alpha (i.e., excess return after attribution to all common factor exposure), on average. His test collects a large sample (n>30) and he is computing the mean (average) excess return such that the both the central limit theorem (CLT) and the law of large numbers apply. His null hypothesis is that, based on a sample of returns, the true (population) ex post realized alpha is approximately zero; therefore, the alternative hypothesis is that the true mean is non-zero and his two-tailed test allows for the possibility that funds destroy alpha via fees. He is going to test his hypothesis with a prespecified significance level of 5.0%, per convention. In this case, each of the following is true EXCEPT for:

He can conduct the test without computing a p-value
The probability of erroneously rejecting a true null hypothesis is 5.0%
He can reject the null if the t-statistic is greater than 1.96
If he reduces the significance level to 1.0%, he reduces the probability of erroneously rejecting a false null

210.2. Analyst Jane is concerned that the average days sales outstanding (DSO) in her coverage sector has increased above its historical average of 27.0 days (a lower number is better). From a large sample of 36 companies, she computes a sample mean DSO of 29.0 days with sample standard deviation of 7.0. Her one-sided alternative hypothesis is that DSO is greater than 27.0. Does she reject the null?

No, do not reject one-sided null as the t-statistic is less than 1.65
No, do not reject one-sided null as the t-statistic is less than 1.96
Yes, do reject one-sided null as the t-statistic is greater than 1.65
Yes, do reject one-sided null as the t-statistic is greater than 1.96

210.3. The average capital ratio of a sample of 49 banks is 7.4% with a sample standard deviation of 5.0%. What is the two-sided 95% confidence interval for the population's true average capital ratio; i.e., the random interval that has a 95% probability of containing the population mean?

5.5% to 9.3%
6.0% to 8.8%
6.7% to 8.1%
7.1% to 7.7%

Answers:

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[How-To: Practice Questions] P2.T5.109. Credit and default risk analysis of mortgages

2012-02-01T17:47:45+00:00

AIMs: Define prepayment risk, reasons for prepayment, and the negative convexity of mortgages. Explain credit and default risk analysis of mortgages, including metrics for delinquencies, defaults, and loss severity.

Questions:

109.1. With respect to the negative convexity of mortgages, each of the following is true EXCEPT:

Negative convexity is induced by higher prepayment rates (higher PSAs) associated with lower interest rates
Negative convexity is induced by lower prepayment rates (lower PSAs) associated with higher interest rates
The lender (or investor in an MBS pass-through) is economically short a call option with strike price equal to the outstanding principal amount
From the perspective of the mortgage investor (the long position in mortgage loan/MBS), the negative convexity, while unfavorable at low yields, tends to favorable at higher yields as durations shorten

109.2. Which of the following metrics is the best measure of TURNOVER as a driver of prepayments?

Change in the price of single-family homes on a period-over-period basis; i.e., real estate price appreciation
Existing home sales for single-family homes as a percentage of the number of such homes owned
Dollar volume of refinancing ("refi") transactions as a percentage of outstanding mortgage loan balances
The change in the level of the 30-year mortgage rate

109.3. In regard to the credit and default risk of mortgages, EACH of the following is true EXCEPT:

Strategic default is when the borrower can afford the monthly payment but voluntarily stops because the combined LTV (CLTV) well exceeds 100%
Default is the point where the borrower loses title to the property
A low loan-to-value, by definition, protects the lender against losses; i.e., protects against the possibility of non-zero loss severity
Evaluating credit risk in the mortgage sector is different than fixed income due to the need to (i) quantify and stratify characteristics of the thousands of loans, (ii) estimate how these attributes will translate into performance, and (iii) calculate returns based on these scenarios.

Answers:

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[Career Guide: News & Articles] 3 Ways Apps Make Money

2012-01-31T18:01:38+00:00

In just a short span of two decades, the Internet has changed the way we live and how we go about carrying out our business. In the early '90s, the Web started as a read-only place where people could just browse and get widely scattered information. One example is the early version of Yahoo, which used to be a directory of various links on the Internet.

SEE: From The Printing Press To The Internet

After the dot-com bust in 2000, the Web went through a serious transformation when a few Internet companies were able to establish successful business models around their offerings. For example, Google incorporated a simple, keyword-based advertising model for its search engine, eBay pioneered online auctions and Amazon became the successful online department store.

By now the Web had transformed itself into an interactive platform, popularly known as the Web 2.0, where you use the Web not just to receive information, but as an interactive medium where you can both read and write. A whole new era of Web services had begun. People took to blogging and many even started conducting their own business and personal activities on the Internet.

Imagine you wanted to go to a movie. In the past, you would have to go to a movie theater to book the tickets. Now, with Web 2.0, you can search the Internet to find the movies playing in the theaters near you, book and print the tickets from the convenience of your home. That's the new Internet for you, and a variety of Web applications are making our lives easier and making us more efficient at conducting business.

There's an App for That

It seems like there is a Web app for almost anything you want to do. Facebook is changing the way we socialize; twitter is growing as a communication platform; Dropbox and Box have made sharing files a breeze; Google apps are reducing our dependence on desktop applications; Groupon gets us the best deals; QuickBooks has revolutionized the way we manage our accounts and so on. Every day new apps are launched, adding newer capabilities to the Web.(For more about the internet, check out 5 Successful Companies That Survived The Dotcom Bubble.)

Let's look at some of the business models used by these web apps.

Advertising and Sponsorships

This is, so far, the most popular business model used across the Web. In this model, instead of charging the users for content or services, the apps place advertisements to earn money. The advertisers are usually charged on the basis of cost per click (CPC), or cost per thousand (CPM). Many large sites, such as Google and Yahoo, have found great success in this model. The model became very popular when Google came up with AdWords, the self-service advertising platform that allows advertisers to widen their reach by placing their ads next to the search results. Such advertising saw great success, as it was highly targeted based on the keywords being searched by the users. Google then launched the AdSense program, which allows even small publishers to start displaying ads in their blogs or sites; they then benefit from Google's huge reach and ad inventory. Today, many apps use advertisements as their only source of income.

Paid Products and Services

In this model, the app charges its users a fixed or a periodic fee for using their product or service. Most apps follow a freemium model, where a basic level of product or service is provided free to the user, but to use the full product they will have to pay. Some apps even support their free version with advertisements and offer an ad-free version with additional features at a premium. Examples of companies following this model are Dropbox and Quick Books Online. Even gaming companies like Zynga make money in this way. Both of them have a free basic version and charge their customers to use the full product.

E-commerce

This is another popular business model where companies set up online shops to sell physical and digital products. For physical goods, the companies maintain warehouses with inventory of their products, while customers go to the online shops and make purchases. Even the payments are collected online, via electronic payment gateways. On receipt of the order and payment, the products are then shipped to the customer. The company makes money from each sale, like a traditional brick-and-mortar business; however, without maintaining a number of actual stores, overhead is significantly lower. Profit margins, therefore, will depend largely on how efficiently they run their businesses. The most popular companies following this business model are Amazon and eBay.

Even services are being sold online. For example, elance.com is a freelance network that connects buyers of services to the sellers, and provides them with a platform to work on projects. Elance earns by charging a commission on each of the projects completed over its platform.

The Bottom Line

These are the three most widely used methods for Web apps to make money. The Internet continues to evolve and we will see a lot more activity in the future. Web gurus are already talking about the Web 3.0 revolution, where the focus of applications is going to shift to data and personalization. In the future, the apps will make finding and acting on information easier than it is now; such advancements will bring along even more business opportunities. (To learn more about the internet, read The Industry Handbook: The Internet Industry.)

[How-To: Practice Questions] P1.T1.64. Arbitrage pricing model (APT) versus CAPM

2012-01-31T16:14:10+00:00

AIMs: Explain the relationship between the CAPM and the APT. Describe how the APT can be used in both active and passive portfolio management.

Questions:

63.1. An arbitrage pricing model (APT) characterizes excess security returns as a linear function of two indexes, I(1) and I(2). In this way, a security's excess return in percentage terms, ER(i), is given by ER(i) = R(i) - Rf = a + b(1)*I(1) + b(2)*I(2), where b(i) is the factor sensitivity to the index, I(i). We observe three securities that fit the APT model, as follows: Security #1 ER(1) = a + 2.0*I(1) + 3.0*I(2) = 8.0; Security #2 ER(2) = a + 4.0*I(1) + 2.5*I(2) = 3.5; Security #3 ER(3) = a + 1.0*I(1) - 2.0*I(2) = -5.5.

Which is the specification of the model?

ER(i) = 1.0 + b(1)*2.5 + b(2)*3.0
ER(i) = 2.0 - b(1)*1.5 + b(2)*3.0
ER(i) = 3.0 + b(1)*0.5 + b(2)*0.5
ER(i) = 4.0 - b(1)*3.0 - b(2)*1.0

63.2. Which of the following is TRUE about the relationship between the CAPM and the arbitrage pricing model (APT)?

CAPM assumes that the market is the only source of covariance between returns
If we employ a procedure (e.g., Roll and Ross) and identify more than one common factor, we can logically reject the CAPM
Similar to the CAPM, in order to test the APT we need to identify a "Market Portfolio" of all risky assets
The APT solution with multiple factors appropriately priced is fully consistent with the Sharpe-Lintner-Mossin form of the CAPM

63.3. In regard to multi-factor models, including the arbitrage pricing model (APT), each of the following is true EXCEPT:

A disadvantage of APT models, in general, is the curse of dimensionality; i.e., k factors requires the identification of k*(k+1)/2 values
A multi-factor risk model is likely to employ fewer factors than a multi-factor alpha (i.e., expected return) model
APT has advantages in flexibility over CAPM: APT is more flexible; does not require that returns are normally distributed; and merely assumes investors are risk-averse
The factor sensitivities (betas) in APT are equal to Covariance(security's return, factor risk premium)/Variance(factor risk premium)

63.4. Your colleague Janet Smith just earned her FRM and argues that multi-factor models like APT offer the following benefits:

I. A multi-index model can assist in PASSIVE portfolio management by closely, if not perfectly, tracking an index without holding all of the index's stocks in the same proportion
II. A multi-index model can assist in ACTIVE portfolio management by determining under- or over-valued stocks
III. A multi-index model can assist in ACTIVE portfolio management by allowing the manager to make factor bets; i.e., skill-based beta
IV. A multi-index model can assist in performance measurement and attribution by re-classifying single-factor alpha as common factor beta

According to Elton and Gruber, which of her assertion are true?

I. only
I. and III. only
II. and IV. only
All of the above

Answers:

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[How-To: Practice Questions] 1.6. Upstream oil and gas

2012-01-31T15:46:00+00:00

AIM: Know the difference between integrated and independent oil companies. Know the difference between “permeability” and “porosity.” Understand how subsurface geologic structures affect oil and gas production.

Questions:

1.6.1. Which of the following companies is most likely an integrated oil company rather than an independent oil company?

Conducts both exploration and production (E&P) activities
In addition to upstream activities, conducts marketing and distribution
Has the resources to locate and acquire mineral interests
Conducts activities with high levels or risk, and is subject to a high level of regulation

1.6.2. The fracturing ("fracking") of shale gas is conducted primarily in order to:

Decrease porosity
Increase porosity
Decrease permeability
Increase permeability

1.6.3. Traditionally, only the drilling success rate was 10% but currently has increased to 60% (unproved) or 75% (unproved and proved reservoirs). Which geophysical method has most contributed to the increase in the dilling success rate?

Aerial photography
Satellite imaging and Imaging radar
Monte Carlo simulation
Seismology

Answers:

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[How-To: Practice Questions] P1.T2.209 T-statistic and confidence interval

2012-01-30T15:47:09+00:00

AIMs: Define, interpret, and calculate the t-statistic. Define, calculate, and interpret a confidence interval.

Questions:

209.1. Nine (9) companies among a random sample of 60 companies defaulted. The companies were each in the same highly speculative credit rating category: statistically, they represent a random sample from the population of CCC-rated companies. The rating agency contends that the historical (population) default rate for this category is 10.0%, in contrast to the 15.0% default rate observed in the sample. Is there statistical evidence, with any high confidence, that the true default rate is different than 10.0%; i.e., if the null hypothesis is that the true default rate is 10.0%, can we reject the null?

No, the t-statistic is 0.39
No, the t-statistic is 1.08
Yes, the t-statistic is 1.74
Yes, the t-statistic is 23.53

209.2. Over the last two years, a fund produced an average monthly return of +3.0% but with monthly volatility of 10.0%. That is, assume the random sample size (n) is 24, with mean of 3.0% and sigma of 10.0%. Are the returns statistically significant; in other words, can we decide the true mean return is great than zero with 95% confidence?

No, the t-statistic is 0.85
No, the t-statistic is 1.47
Yes, the t-statistic is 2.55
Yes, the t-statistic is 3.83

209.3. Assume the frequency of internal fraud (an operational risk event type) occurrences per year is characterized by a Poisson distribution. Among a sample of 43 companies, the mean frequency is 11.0 with a sample standard deviation of 4.0. What is the 90% confidence interval of the population's mean frequency?

10.0 to 12.0
8.8 to 13.2
7.5 to 14.5
Need more information (Poisson parameter)

Answers:

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[How-To: Practice Questions] 1.5. Home and auto purchase

2012-01-30T15:40:19+00:00

Questions:

1.5.1. Home ownership can confer special tax benefits (e.g., deduction or exclusion) with respect to each of the following EXCEPT:

Mortgage interest
Capital gains on sale (up to a limit), if meet "use test"
Prepaid interest ("points") paid on mortgage loan
Principal component of the monthly mortgage payment

1.5.2. For the same automobile and for the same term (e.g., four years), a lease offers lower monthly payments than a purchase. Which of the following BEST explains how this is possible?

As ownership is not transferred to the leasee, the lower risk translates into a lower interest rate (money factor)
The dealership is motivated to sell a certain percentage of cars by way of lease, so the dealer will typically reduce the effective purchase price on a lease
While the purchase amortizes the entire purchase price, the lease only amortizes (depreciates) the difference between the purchase and the residual
The lease contains a penalty for miles driven above an annual limit, so this is expected to make up the difference

1.5.3. John and Mary Smith are considering the purchase of home with a price of $120,000. They will make a downpayment equal to 20% of the purchase price, plus they will pay closing costs of $3,500. They can get a 30-year fixed rate loan with an interest rate of 5.0% per annum. What is the total principal & interest payment per month?

$498.17
$515.35
$603.28
$644.19

Answers:

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[News & Announcements] 2012 FRM Calendar

2012-01-28T01:04:33+00:00

It's that time of the year again. It's time to begin preparing for the 2012 FRM Exam. We've populated our expected publish schedule for all of the 2012 contents. Below you will find the 2012 bionicturtle.com calendar. All contents are planned to be published on time, however due to unforeseen circumstances dates are subject to change.

As a reminder, we recommend that you utilize the premium study planner while you are preparing for the exam. If you have any questions during your studies or need clarification, please utilize our forum where David provides daily support.

Along with the contents in the calendar below, David writes fresh high-quality annotated practice questions daily through the work week.

Good luck in your studies!

[How-To: Practice Questions] P2.T5.108. Mortgage payment factor

2012-01-27T18:36:46+00:00

AIMs: Describe the key attributes that define mortgages. Calculate the mortgage payment factor. Understand the allocation of loan principal and interest over time for various loan types. (Fabozzi)

Questions:

108.1. Sally has been approved for a 30-year fixed rate (fully-amortizing) mortgage with an interest rate of 3.48% per annum. However, she can also select a 15-year mortgage with an stunningly low interest rate of 2.52%. If the loan balance has yet to be determined but the same for both mortgages, what is the ratio of the monthly payment (principal plus interest) on the 15-year mortgage to the monthly payment on the 30-year mortgage?

72%
149%
225%
278%

108.2. For 2012, the conforming loan balance limit continues to be $417,000 (for the second year in a row). If a 30-year fully-amortizing loan is originated with exactly this balance, and the 30-year fixed mortgage rate is 3.6% per annum, after the first two (2) monthly mortgage payments how much PRINCIPAL will the borrower have cumulatively paid?

$652.64
$989.17
$1,035.23
$1,291.68

108.3. A 30-year 5/1 hybrid ARM has an initial loan balance of $110,000 with a fixed rate of 3.00% per annum. After five years, when the balance is reduced to $97,797.00, the rate resets to 4.80%. What is, respectively, the total monthly payment (principal plus interest) during the first sixty months and on the sixty-first (61st) month?

$489.25 (1-60th) and $503.29 (61st)
$489.25 (1-60th) and $577.13 (61st)
$463.76 (1-60th) and $513.11 (61st)
$463.76 (1-60th) and $560.37 (61st)

Answers:

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[How-To: Videos] Profitability Ratios, CFA L1 (Financial Statements)

2012-01-27T02:31:29+00:00

Return on Sales (income statement) and Return on Invesmtent (returns to balance sheet).

[How-To: Practice Questions] P1.T1.63. Arbitrage pricing model (APT)

2012-01-27T00:17:39+00:00

AIMs: Describe the APT and the assumptions underlying it. Use the APT to calculate the expected returns on an asset.

Questions:

63.1. Each of the following is an assumption of the arbitrage pricing model (APM) EXCEPT for:

Homogeneous expectations
A security (stock) is linearly related to a set of indexes (factors); i.e., linearity assumption
Investors utilize a mean-variance framework
Error terms are uncorrelated; i.e., E(e(i),e(j)] = 0

63.2. Your colleague Robert uses a two-factor model in order to estimate the volatility of a Portfolio. He specifies the covariance matrix as follows:

The Portfolio has the following factor sensitivities (i.e., betas): 0.60 to the Global Equity Factor and 0.25 to the Global Bond Factor. The volatility of the Portfolio is nearest to which value?

16.44%
18.60%
21.15%
25.30%

63.3. In order to determine the covariance between Markets A and B, you develop the following factor covariance matrix using a two-factor model:

Suppose that Market A exhibits the following factor sensitivities: 0.80 to the GDP Factor and 0.10 to the Interest Rate factor. Market B exhibits the following factor sensitivities: 0.70 to GDP and 0.20 to Interest Rates. Which value is nearest to the covariance between Market A and Market B? (note: this is a variation on GARP's actual sample question in 2011 Practice Exam, Part 1, Exam 1, Question 6).

0.0028
0.0075
0.0164
0.1259

Answers:

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[How-To: Practice Questions] P1.T2.208. Sample mean estimators (Stock & Watson)

2012-01-26T02:52:41+00:00

AIMS: Describe and interpret estimators of the sample mean and their properties. Describe and interpret the least squares estimator. Describe the properties of point estimators: Distinguish between unbiased and biased estimators. Define an efficient estimator and consistent estimator.

Questions:

208.1. A random sample, drawn from a population with unknown mean and variance, includes the following six outcomes: 3, 6, 6, 8, 9, 10. Please note: "random sample" implies independent and identically distributed (i.i.d.). Each of the following is TRUE except:

The sample variance is 6.40
The standard error of the sample mean is 2.61
The standard error of the sample mean is an estimator of the standard deviation of the sample mean
The sample variance employs a degrees of freedom correction (n-1). However even for this small sample, the standard error of the sample mean uses (n) or SQRT(n) in the denominator and therefore does not itself employ a degrees of freedom correction.

208.2. We assume there is a population mean for the monthly return of hedge funds that employ a certain strategy (e.g., market neutral funds in 2011). A sample of hedge fund returns is collected and the sample mean return is +1.0% per month.

If the returns are not a random sample (i.e., are not i.i.d.), the sample mean may be biased
If the returns are a random sample (i.i.d.), the sample mean is the Best Linear Unbiased Estimator (BLUE)
If the returns are a random sample (i.i.d.), the sample mean is the least squares estimator
If the returns are a random sample (i.i.d.), the property of consistency implies that the variance of the sample mean is smaller than the variance of alternative estimators of the population mean

208.3. A backtest of a 99.0% value at risk (VaR) model over two years observes 8 exceptions in 500 trading days; i.e., the VaR loss threshold was exceeded on 1.6% of the days but the model was calibrated to expect losses in excess of the VaR for only 5 days (1.0%). Please note that we assume exceptions (exceedences) are i.i.d. with a Bernoulli distribution. What is, respectively, the standard error of the sample mean and the t-statistic? (Bonus for finding the p-value, which cannot be done with most calculators)

3.9% (s.e.) and 0.88 t-statistic
4.7% (s.e.) and 1.03 t-statistic
5.6% (s.e.) and 1.07 t-statistic
6.2% (s.e.) and 1.65 t-statistic

Answers:

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[Career Guide: News & Articles] Financial Careers With Excellent Salaries

2012-01-25T21:57:37+00:00

The financial industry offers challenging and lucrative career opportunities for finance professionals. As a finance professional, there is a plethora of roles that you can explore. You may join the finance department of a corporation, work in the banking and financial services sector, or enter the lucrative world of investment banking and financial markets. If selling insurance products or assessing the risk of loss is what interests you, then the actuarial industry will be the right fit. (To learn more, check out A Look At Entry-Level Careers In Finance.)

TUTORIAL: Financial Careers

Many of these careers offer above average pay, and some of them offer very attractive salaries. At the entry-level, the jobs that pay you best are in the field of financial analysis and sales. The high paying jobs lean more towards the managerial roles.

Financial Analyst

As a financial analyst, or an investment analyst, your primary role involves performing financial analysis for internal and external clients to help them make investment decisions. A sales job is more oriented towards selling financial products and services. Financial analysis and sales careers can be started with a bank, insurance company or even a securities firm. According to salary.com, the salaries earned by financial analysts vary widely starting from $38,765 and going as high as $102,977 on average.

As you move up on the career ladder you will gain access to higher-paying roles. How much you can earn in a chosen career primarily depends on two characteristics: the level of responsibility and accountability the job demands, and the consequences of making mistakes. (For more, read 6 Steps To Successfully Switching Financial Careers.)

For example, in an insurance firm, it is important they have an accurate estimate of risk the firm is taking, and how much premium it's charging for the given amount of risk. Any significant deviations can lead to significant losses. That's the reason why actuaries are paid among the highest in the industry. Actuaries interpret statistics to determine probabilities of accidents, sickness, death, and loss of property from theft and natural disasters. According to a Career Cast 2011 survey, actuary was the third-best job in 2011 with an average salary of $87,204.

Chief Financial Officer

Another top-paying career option is to become a Chief Financial Officer or a financial manager in large corporation. These are among the most highly-paid managerial jobs in finance. As a CFO or a finance manager, you are responsible for all financial aspects of the business including financial risk management, planning, bookkeeping and financial reporting. The median salaries are $336,669, but this can be even higher in large corporations.

Account Manager

Within corporations, you can also build your career as an accounts manager. An accounts manager is responsible for managing the general accounting function. The accounts manager will ensure that all internal accounting processes are followed, and also oversee the completion of ledger accounts and financial statements. Some organizations may require the CPA designation and at least seven years of experience in the accounting field according to salary.com. The median salary for accounts manager is $83,708 in the United States. (For some insight on past high-paying jobs, see Top 10 Highest-Paying Jobs For 2011.)

Risk Management

Risk management within banks and financial institutions is another area that has gained tremendous importance in the past few years. As a risk manager, you will be responsible for managing a variety of risks faced by different business units, the key risks being credit risk, market risk, operational risks and liquidity risk. Banks have invested huge amounts of resources in sophisticated technology and people to help them measure, manage and mitigate these risks. Jobs in this area are expected to grow in the future. Many banks look for specialized knowledge about risk management while hiring mid-level to senior positions. One way to start a career as a risk manager is to get certified as a risk manager by PRMIA or GARP, the two risk management certification bodies. According to a salary.com survey, risk managers earn an average salary of $94,606 per annum in the U.S. The pay scale can vary from $80,000 to $111,000.

Financial Advisor

Another lucrative financial career is to become a financial advisor. As a financial advisor, you will be required to advise clients in managing and planning their finances. You are required to have thorough knowledge about taxes, investment options, financial products, insurance, pension and real estate. With this knowledge, you help your clients set their financial goals, devise investment strategies based on their risk appetite, manage their taxes and so on. According to PayScale.com, the average salaries for financial advisors can range from $24,000 to $101,000 in the U.S.

The Bottom Line

These are some of the top-paying financial careers. The job requirements and how much you can earn in these careers is also influenced by the location you work at. For example, the same job will pay differently in New York than in Detroit. There is a job in the market for every financial passion, be it helping the individual investor plan his or her long-term finances, monitoring a company's financial resources and helping allocate it, or developing financial products or trading in them. Finance has something for everyone. Let your interest and knowledge guide you. (To learn more, read Top 10 Cities For A Career In Finance.)

[Career Guide: News & Articles] Celebrities Who Worked In Finance Before They Became Famous

2012-01-25T21:53:28+00:00

They have worked as pen salesmen, hawkers, cookie scoopers, ballet dancers, firefighters, professional soccer players, shoe salesmen, restaurant hostesses, lion cage tenders, lifeguards, mascots, bellhops and telemarketers. Think of any role and they have done it. These men and women have undertaken different jobs to stay afloat before becoming celebrities. (For related reading, see Winning Celebrities And The Companies They Endorse.)

TUTORIAL: Financial Careers

Some celebrities worked in finance before they became rich and famous. Some worked part-time jobs, while others worked full-time. Here are some of the notable ones.

Whoopi Goldberg is an American comedian, actress, singer-songwriter, political activist, author and a talk show host. She sustained herself while looking for acting jobs by working as a bank teller, a bricklayer and a cosmetologist at a mortuary.

Raymond Albert "Ray" Romano is an American actor, writer and stand-up comedian. He studied to become an accountant, and then worked as a bank teller where he met his wife Anna.

Red Foo, one half of the party rock band LMFAO, was tracking stocks as a kid under his father Barry Gordon's guidance. Before he made the room groove, he held a job as a day trader. He still invests, though his portfolio has become less risky. He believes that Apple's stock is a big winner.

Erin Isabelle Burnett is the anchor of CNN's "Erin Burnett OutFront." She was the co-anchor of CNBC's "Squawk On The Street" program and the host of CNBC's "Street Signs" program. Burnett began her career as a financial analyst for Goldman Sachs in investment banking. Her work included the areas of mergers and acquisitions and corporate finance. (To learn more, check out Biggest Merger And Acquisition Disasters.)

Timothy Maxwell "Max" Keiser is an American broadcaster and film-maker. He was the co-founder of the Hollywood Stock Exchange. He has worked in finance for about 25 years and started his career as a stock broker on Wall Street.

Method Actor

Shia Labeouf isn't leaving his day job … yet. He got hooked on trading stocks while he worked on his movie "Wall Street 2: Money Never Sleeps." Preparing for his role at John Thomas Financial, he managed to turn his $20,000 to around $489,000, extending his midas touch from movies to finance.

Lou Dobbs is an American journalist, radio host, television host on the Fox Business Network and author. Dobbs worked as a cash-management specialist for Union Bank in Los Angeles after graduating from Harvard University.

Martha Stewart made her millions teaching us how to bake and decorate homes better. She started her career as a stock broker in New York.

The iconic Colonel Sanders of Kentucky Fried Chicken (KFC) worked as an insurance salesman before his famed career as founder of KFC.

It is difficult to imagine Demi Moore the star of "Indecent Proposal," "GI Jane" and "Striptease" as an employee in a debt collection agency, but she was.

Moving up the Ladder

Former CEO of Hewlett-Packard, Carly Fiorina, started out as a secretary and then moved into a broker position at Marcus & Millichap Real Estate Investment Services, a commercial real estate brokerage firm.

Brett Ratner, director of the "Rush Hour" movies, worked as a stockbroker at South Richmond Securities on Wall Street.

Prime Minister John Key of New Zealand worked as a foreign exchange dealer at Elders Finance in Wellington, before rising to be head foreign exchange trader in two short years. He has also served as Merrill Lynch's head of foreign exchange. He chose to jump from the high volatility of the world of finance to the more volatile field of politics.

Former British Prime Minister Sir John Major took a correspondence course in banking after being passed over for a bus conductor's job. He joined as a junior executive at Standard Chartered Bank before moving up the ladder.

Rick Yune, the handsome, chilling villain from "Die Another Day" was not new to taking risks, having been a hedge fund trader post graduating from Wharton Business School. At the age of 21, he joined as a trainee at a hedge fund. When it was relatively difficult for a newbie to land a role in a hedge fund, he found it "humbling" to be entrusted with so much responsibility. He also enjoyed the role for its risk and not knowing what to expect next. He, however, was more attracted to the calling of acting.

Michael Roiff, the independent film producer, initially started his career in the world of finance. He briefly worked as a management consultant at CIBC World Markets and The Parthenon Group before he set off to produce his first film "Waitress" in 2007.

The Bottom Line

Before the big bucks and glamour, these celebrities worked at regular white collar jobs, like a lot of us. They were ready to work many jobs to land the one they loved. You never know when the spotlight will shine on you! (For additional reading, check out Celebrities You Can Bank On.)

[How-To: Videos] Solvency Ratios, CFA L1 (Financial Statements)

2012-01-25T19:49:20+00:00

Solvency ratis are either debt ratios (balance sheet-balance sheet) or coverage ratios (income statement-interest)

Bionic Turtle

[How-To: Practice Questions] P1.T2.213. Sample variance, covariance and correlation (Stock & Watson)

Questions:

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[How-To: Practice Questions] P2.T5.112. Cash flow yield of mortgage backed security (MBS)

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[Career Guide: News & Articles] Reinventing Brands: Makeover Or Move Over

See: Advertising, Crocodiles And Moats

Apple

McDonald's

Sears and Kmart

Jack in the Box

Kodak

The Bottom Line

[Career Guide: News & Articles] Biggest Industry Ups And Downs Of 2011

SEE: Consumer Spending As A Market Indicator

Total Returns (Net Asset Value) as of Jan. 31, 2011

The Biggest Rises

The Biggest Falls

The Bottom Line

[How-To: Practice Questions] P1.T2.212. Difference between two means

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[How-To: Practice Questions] P2.T5.111. MBS dollar roll

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[How-To: Practice Questions] P1.T2.211. Type I and II errors and p-value (Stock & Watson)

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*[How-To: Notes] 2012.T5. Market

*[How-To: Notes] 2012.T1. Foundations

[How-To: Practice Questions] P2.T5.110. Agency and private-label mortgage-backed securities (MBS)

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[How-To: Practice Questions] P1.T2.210. Hypothesis testing (Stock & Watson)

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[How-To: Practice Questions] P2.T5.109. Credit and default risk analysis of mortgages

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[Career Guide: News & Articles] 3 Ways Apps Make Money

SEE: From The Printing Press To The Internet

There's an App for That

Advertising and Sponsorships

Paid Products and Services

E-commerce

The Bottom Line

[How-To: Practice Questions] P1.T1.64. Arbitrage pricing model (APT) versus CAPM

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[How-To: Practice Questions] 1.6. Upstream oil and gas

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[How-To: Practice Questions] P1.T2.209 T-statistic and confidence interval

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[How-To: Practice Questions] 1.5. Home and auto purchase

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[News & Announcements] 2012 FRM Calendar

[How-To: Practice Questions] P2.T5.108. Mortgage payment factor

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[How-To: Videos] Profitability Ratios, CFA L1 (Financial Statements)

[How-To: Practice Questions] P1.T1.63. Arbitrage pricing model (APT)

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[How-To: Practice Questions] P1.T2.208. Sample mean estimators (Stock & Watson)

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[Career Guide: News & Articles] Financial Careers With Excellent Salaries

TUTORIAL: Financial Careers

Financial Analyst

Chief Financial Officer

Account Manager

Risk Management

Financial Advisor

The Bottom Line

[Career Guide: News & Articles] Celebrities Who Worked In Finance Before They Became Famous

TUTORIAL: Financial Careers