Faculty of Health, Arts and Design

FIN 10002

Financial statistics Notes- Part 1

Financial Mathematics, Descriptive Statistics, Probability
and the Normal Distribution
Prepared by
Neela Khan
Revised and Updated
2015

Swinburne University of Technology

Faculty of Health, Arts and Design

FIN 10002: Financial Statistics- Part 1

Financial Mathematics, Descriptive Statistics, Probability
and the Normal Distribution

Notes prepared by Neela Khan

Revised and updated 2014
Acknowledgement to Vida Weiss for contributions to Excel work

Financial Statistics Notes

Table of Contents
1.

FINANCIAL MATHEMATICS .............................................................................. 3

1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
1.7.

2.

DESCRIPTIVE STATISTICS ...................................................................................

2.1.
2.2.
2.3.
2.4.
2.5.
2.6.
2.7.
2.8.
2.9.
2.10.

3.

Introduction to Statistics ................................................................................................ 3

Visual Displays for Qualitative Data ............................................................................. 6
Summarising Quantitative Data ................................................................................... 18
Measures of Location ................................................................................................... 48
Measures of Dispersion................................................................................................ 60
Describing Data Sets .................................................................................................... 64
Comparing Data Sets: A Worked Example ................................................................. 65
Cross Tabulation .......................................................................................................... 71
References: ................................................................................................................... 75
Exercises ...................................................................................................................... 77

INTRODUCTION TO PROBABILITY ...................................................................

3.1.
3.2.
3.3.
3.4.
3.5.
3.6.
3.7.
3.8.

4.

Interest, Investments and Loans ..................................................................................... 5

Compound Interest ......................................................................................................... 7
Annuities ...................................................................................................................... 22
Amortisation ................................................................................................................ 37
Discounted Cash Flow Analysis .................................................................................. 47
References: ................................................................................................................... 58
Exercises ...................................................................................................................... 59

Prelude ........................................................................................................................... 3
Tree Diagrams ................................................................................................................ 4
Probabilities from Data .................................................................................................. 5
Relationships between Events ........................................................................................ 5
Two General Examples ................................................................................................ 10
Discrete Probability Distributions ................................................................................ 12
References: ................................................................................................................... 21
Exercises ...................................................................................................................... 22

THE NORMAL PROBABILITY DISTRIBUTION ................................................

4.1.
4.2.
4.3.

Introduction to the Normal Distribution ........................................................................ 3

References: ................................................................................................................... 24
Exercises ...................................................................................................................... 25

Financial Statistics Notes

Faculty of Health, Arts and Design

FIN10002 Financial Statistics