Principles of Finance

# Key Terms

arithmetic mean
a measure of center of a data set, calculated by adding up the data values and dividing the sum by the number of data values
bar graph
a chart that presents categorical data in a summarized form based on frequency or relative frequency
bivariate data
paired data in which each value of one variable is paired with a value of a second variable
data visualization
the use of graphical displays, such as bar charts, histograms, and scatter plots, to help interpret patterns and trends in a data set
empirical rule
a rule that provides the percentages of data values falling within one, two, and three standard deviations from the mean for a bell-shaped (normal) distribution
expected value
a weighted average of the values of a variable where the weights are the associated probabilities
exponential distribution
a continuous probability distribution that is useful for calculating probabilities within the time between events
frequency distribution
a method of organizing and summarizing a data set that provides the frequency with which each value in the data set occurs
geometric mean
a measure of center of a data set, calculated by multiplying the data values and then raising the product to the exponent $1n1n$, where n is the number of data values
histogram
a graphical display of continuous data showing class intervals on the horizontal axis and frequency or relative frequency on the vertical axis
interquartile range (IQR)
a number that indicates the spread of the middle half, or middle 50%, of the data; the difference between the third quartile (Q3) and the first quartile (Q1)
median
the middle value in an ordered data set
mode
the most frequently occurring data value in a data set
normal distribution
a bell-shaped distribution curve that is used to model many measurements, including IQ scores, salaries, heights, weights, blood pressures, etc.
outliers
data values that are significantly different from the other data values in a data set
percentiles
numbers that divide an ordered data set into hundredths; often used to indicate position of a data value in a data set
population data
data representing all the outcomes or measurements that are of interest
portfolio
a collection of financial investments, such as stocks, bonds, mutual funds, certificates of deposit, etc.
probability distribution
a mathematical function that assigns probabilities to various outcomes
quartiles
numbers that divide an ordered data set into quarters; the second quartile is the same as the median
sample data
data representing outcomes or measurements collected from a subset or part of a population
scatter plot (or scatter diagram)
a graphical display that shows the relationship between a dependent variable and an independent variable
standard deviation
a measure of the spread of a data set that indicates how far a typical data value is from the mean
time series graph
a graphical display used to show measurement data plotted versus time, where time is displayed on the horizontal axis
variance
the measure of the spread of data values calculated as the square of the standard deviation
weighted mean
a measure of center of a data set in which each data value has a corresponding weighting
x-axis
the horizontal axis in a rectangular coordinate system
y-axis
the vertical axis in a rectangular coordinate system
z-score (or z-value)
a measure of the position of a data value in the data set, calculated by subtracting the mean from the data value and then dividing the difference by the standard deviation
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