Spot prices are a basic building block in finance, but they are tricky when the commodity is money. When the commodity is money, spot prices are called spot rates (a.k.a., spot interest rate). A spot price is simply the market’s current price to buy or sell a commodity for immediate delivery. Spot prices are so
Our forum contains hundreds of questions about duration. Duration often vexes new candidates, in part because there are several types. Let’s first settle a confusion: the units of all durations are years (time). So, regardless of which duration, we can typically say something like “The bond’s duration is 4.52 years.” I taught duration several years
Functions based on the normal distribution are easy to retrieve in code or excel, so we do not really need z tables anymore, in practice. But we still want to understand the z table. Why? Because the popular exam calculators (TI BA II+ and HP 12c) do not include z table functionality, so we do
Recently 25 banks were surveyed. Their sample average total capital is 8.40% (i.e., Tier 1 plus Tier 2 as a percentage of risk-weighted assets, RWA) with a sample standard deviation of 1.0%. Our one-sided null hypothesis is that the population’s “true” average total capital is less than or equal to 8.0%.