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Equation of Straight Line Regression Equation and Correlation Coefficient Arithmetic Progression Geometric Progression
▪ Two intercepts (b where line touches y axis) and (a where line touches x It is a sequence where each It is a sequence where each new
axis). y=a+bx
Definition
new term is formed by adding term is formed by multiplying by a
▪ To find x intercept set y=0 in equation
▪ to find y intercept set x=0 in equation a constant to the previous constant the previous term
term.
𝑺𝒙𝒚
Constructing an Equation r= 𝑺
𝒙 × 𝑺𝒚
Point Slope Form Two Point Form Two Intercept From a, a + d, a + 2d, a + 3d, a + 4d, a, ar, ar2, ar3, ....
y – y1 = m ( x – x1 ) y – y1 x − x1
Common difference/
= r= 𝑏 𝑥𝑦 𝑏𝑦𝑥
nth term = a + d (n-1) nth term = ar n-1
Ratio
▪ Some points are said to be co liner if they fall on same line Coefficient of regression(b) calculated as d= a2 –a1 ‘r’ is common ratio calculated as
▪ Some lines are concurrent if they pass through one point 𝑎2
+ve value of y increases as the value of x increases r=
𝑎1
▪ Solving two equations of straight lines simultaneously will give coordinates
-ve Value of y declines as value of x increases (and vice versa).
of the point of intersection of these two lines.
▪ Lines are concurrent if they pass through exactly one point. 0 No correlation is seen to exist between the variables
▪ Non parallel lines will always intersect each other at one single point in The Correlation Coefficient(r)
space. Which is called solution of equation. ▪ a single number that describes degree of relationship btw two variables. 3rd term – 2nd term 3rd term ÷ 2nd term
▪ Parallel lines never intersect each other and have not solution. ▪ Its value ranges from -1 to 1
Test of progression
▪ Overlapping equations have infinite number of solution. = =
-1 Perfect negative correlation 2nd term – 1st term 2nd term ÷ 1st term
Breakeven analysis -1 - 0 negative correlation become weaker by with increase in value
Total contribution = Contribution per unit Number of units sold. 0 No correlation
If LHS = RHS then the term is an If LHS = RHS then the term is a GP
Per Unit contribution = Sales price – Variable Cost 0 - -1 positive correlation become stronger by increase in value
AP
+1 perfect positive correlation
Coefficient of Determination r2
▪ It shows how much variation in y is explained by variations in x
▪ Formula of is r2 & Its value ranges from 0 to +1.
Sum of first
𝒂(𝒓𝒏 − 𝟏)
N terms
Laws of Exponents Log and rules of Log Spearman’s Rank Correlation Coefficient 𝑺=
OR 𝒓−𝟏
-Spearman’s Rank Correlation is used to
find out the relationship between
objective values where it is not possible to
assign them quantities instead variables
are assigned orders.
Sum of reducing geometric sequence upto infinity terms
-This approach is also called “Ordinal
Approach” This can only be calculated for a reducing
In case of ties, add tie effect “t” geometric sequence. i.e. Geometric 𝒂
Sequence Having r between -1 and 1 or 𝑺=
1−𝒓
𝟔 σ 𝒅𝟐 −𝒕 𝒎(𝒎𝟐 −𝟏) -1>r>+1
r= 1- 𝒏(𝒏𝟐 −𝟏)
t= 𝟏𝟐
QM Formula Sheets by Sir Jahanzaib (Chapter 5-6)
Simple & Compound Interest Annuity Perpetuity
Simple interest Compound interest Ordinary Annuity Annuity Due Perpetuity is a type of annuity that receives an infinite amount of
is where the annual interest is a is where the annual interest is based on payments (receipts) are in arrears payments (receipts) are in advance periodic payments.
fixed percentage of the original the amount borrowed plus interest i.e. made at the end of each i.e. made at the beginning of each
amount borrowed or invested (the accrued to date. E.g. payment period payment period. To calculate present value of perpetuity PV= R/r
principal)E.g ▪ profit and loss sharing accounts. e.g. e.g.
▪ fixed deposits Housing loan, payment of Rental lease payments, life Practical Application of annuity and perpetuity
S = P ( 1 + r t) S = P ( 1 + r )t mortgage, insurance premium, etc.
1- Sinking Fund
I=P r t I=P [(1+r)t -1] coupon bearing bonds, etc.
1+𝑟 𝑡 −1 1+𝑟 𝑡 −1 Setting aside a fixed sum of money at regular intervals to achieve a
𝐒o=R 𝐒(d) =R x (1+r) specific sum at some future point in time.
𝑟 𝑟
Compounding vs discounting 1− 1+𝑟 −𝑡 1− 1+𝑟 −𝑡
𝐏o=R 𝐏o=R x(1+r)
Compounding
𝑟 𝑟 2- Comparing Cash flows
•The method uses to know the value at the end of t periods is We can compare two different cash flows by calculating their
Formula for total interest in Annuity present value. Future cash flow having higher present value will be
known as Compounding.
•Compounding uses nominal interest rates expressed in % age. more favorable.
If Sum is Given I=S-Rnt
•compounding factor is (1+r)n OR
Discounting 3- Investment Appraisals
if P is Given I=Rnt-P Discounted cash flow is a technique for evaluating proposed
•The process of determining the present value of the amount to be
received in the future is known as Discounting. Applied to both Annuity Ordinary and Due investments There are two methods of DCF:
•Discount factors are used in Discounting
a) Net present value (NPV) method: if sum PV of all present and
future cash flows are positive investment should be accepted.
QM Formula Sheets If NPV is Positive : Investment should be accepted.
If NPV is Zero : We are Indifferent
Equivalent Rate of Interest (effective interest rate)
Designed by Sir Jahanzaib If NPV is Negative : Investment should not be accepted.
-IRR is a discount rate that makes the net present value (NPV) of all
https://www.youtube.com/watch?v=PTOSWns cash flows from a particular project equal to zero.
Annualized Percentage Rate or APR -IRR calculation is a more complex matter and is out of our
zuvY&list=PLmjs8iVq-
Annualized Percentage Rate or APR) is the periodic interest rate tpq3ycOm0wS7na6NzjasQgi7 syllabus However we can Estimate IRR using following method
multiplied by the number of periods per year.
QM Formula Sheets by Sir Jahanzaib (Chapter 4)
Inequalities
Calculator Videos Scan these QM Codes with your Mobile
Video 1 General guideline & tips for Video 2 Finding Unknown Value ( 1 Video 3 solving simultaneous
calculators Unknown and 1 Equation) equation (2 unknown)
Video 4 solving simultaneous Video 5 Find a, b and r in regression Video 6 Finding Sum, Mean, SD and
equation (3 unknown) analysis variance in regression
Analysis
Solving inequalities
"Solving'' an inequality means finding all of its solutions.
Video 7 Finding IRR with the help of Video 8 Finding Mean SD Variance Video 9 calculator memory function
A "solution'' of an inequality is a number which when substituted Calculator of grouped and ungrouped while calculating Mean
for the variable makes the inequality a true statement. data
o These things do not affect the direction of the inequality:
Add (or subtract) a number from both sides
Multiply (or divide) both sides by a positive number
Video 10 Finding Probability Normal Video 11 Finding Probability Normal Video 12 Finding slope equation of
Simplify a side
o But these things do change the direction of the inequality i.e.
distribution area under distribution area under line from two points
("<" becomes ">" for example): the curve p q and r the curve p q & r or intercepts and
Multiply (or divide) both sides by a negative number Part 1 Part2 finding VC+FC
Swapping left and right hand sides
Mean<median<mode Mean=median=mode
Positive
Mean>Median>Mode
Chapter 7 - 8
Visit www.Nearpeer.org for courses of PRC
Click on the following link or SCAN the QR Code to
Open the Course
https://www.nearpeer.org/chartered-accountancy-final
QM Formula Sheets by Sir Jahanzaib (Chapter11 & 12)
Probability in single random Experiment Probability in single Experiment Multiple Outcome Discrete Probability Distributions
number of favorable outcome in sample space
Additional Law (OR Law) i.e. probability of either A or B Binomial Poisson Hyper Geometric
Probability of an Event ‘A’ i.e. P(A) = Mutually Exclusive, P(A or B) OR P(AUB) = P(A) + P(B) ▪ n< 20 and P > 0.05 • n>20 and P<0.05 without replacement
number of total outcomes in sample space
Criteria
Not Mutually-Exclusive, P(AUB) = P(A) + P(B) - P(A and B) ▪ with replacement • Or Time Trials
▪ expressed as a number 0 to 1 (or a % between 0% to 100%) Mutually Exclusive Event : two events that cannot occur X=0,1,2,3,…,n X=0,1,2,3,…. X=0,1,2,…,n/k (WEIL)
▪ 0 indicates something cannot occur (Impossible Event) and 1 that it simultaneously. n,p Λ N, n, k
is certain to occur (Sure Event) Not Mutually exclusive Events: two events that can occur
▪ The probability of an event occurring plus the probability of that event simultaneously.
not occurring must equal 1.(Complement Law)
▪ Sum of probabilities of all possible outcomes is equal to 1 and such Probability in Successive Experiments AND Law
▪ No of trials are fixed. ▪ This probability consists ▪ The successive trials
events are collectively called Exhaustive Event. Method # 1Multiplication Law ▪ two outcomes p of rare events are dependent upon
▪ Sample Space is set of all possible outcomes of a random Experiment. Multiplication law (AND Law)i.e. Probability of Occurring Both A then B (Success) and q ▪ n is a very large value the result of previous
▪ Outcomes are also called Sample point. If A,B are independent, then P(A and B) OR P(A ∩ B)= P(A) x P(B) (Failure) and p is very small. trial
Different Sample Spaces If A,B are Dependent, then P(A and B) OR P(A ∩ B)= P(A) × P(B|A) ▪ p+q=1 | p=1-q | q=1-p ▪ It has only one ▪ The mean of the
o Mean = µ = np parameter “mean” so distribution is equal to
Flip one coin Sample space S={H,T} n=2 Dependent Events Two events are dependent if the occurrence of first o Variance =npq that n*k/N.
Roll one Dice Sample space S=(1,2,3,4,5,6) n=6 affects occurrence of the second so that the probability is changed. o S.D = 𝑛𝑝𝑞 ▪ 𝜇 = mean =variance
Independent Events: is an event that has no connection
Suits Diamond Hearts Spade Club to another event's chances of happening (or not happening).
Normal Distribution
Color Red Black Conditional Probability: is the probability ▪ Probability distribution of a continuous variable(with no gaps)
Cards n=52 13 13 13 13 of one event occurring with some relationship ▪ The plot of a normal distribution (normal curve) has following Properties:
to one or more other events ▪ It is symmetrical i.e. bell shaped;
Non Pictured Cards Pictured Cards ▪ Both tails of the distribution approach but never meet the horizontal axis.
Probability in Successive Experiments CSS
A(Ace) & 2 to 10 J-Jack Q-Queen K-King ▪ It is described by its mean () (which is the same as the median and the
Method # 2 Combine Sample Space
▪ Treat successive experiments as one experiment & draw combined sample space
mode) and standard deviation (σ).
Designed by Sir Jahanzaib A two-tailed test, also known as a non directional hypothesis, is the standard test of
significance to determine if there is a relationship between variables in either direction.