Microsoft Excel is a powerful tool. You can use it to track your personal budget, create a shopping list, or build a corporate cash-flow statement. Sometimes, troubleshooting an Excel file can be difficult, though. As you can see in examples below, the variables in an equation are represented by grid coordinates consisting of letters and numbers. This means that you must look at the coordinates and try to figure out what the variable actually represents. There is a better way. If you right-click on a cell and click “Define Name”, you can rename the cell. This means that instead of the cell being named...

### What does it mean for a stock to be normally distributed?

According to investopedia, a normal distribution is “a probability distribution that plots all of its values in a symmetrical fashion and most of the results are situated around the probability’s mean”. If a firm’s returns are normally distributed, it means that if you create a histogram of a company’s returns, over a larger period of time, the histogram would take a bell shape, centered on the mean return. If a stock’s return is normally distributed, it means that 68.26% chance that a return will be within one standard deviation ([pmath size=10]sigma[/pmath]) from the mean. There is a 95.44% chance that the return will be...

### What is the cost of equity?

Two weeks ago, we learned about a company’s beta. Last week, we used the company’s beta when we learned about the capital asset pricing model. This week, we are going to take things a little further. In today’s post, we are going to be talking about the cost of equity. Investopedia states that “a firm’s cost of equity represents the compensation that the market demands in exchange for owning the asset and bearing the risk of ownership.” Traditionally, you would calculate the cost of equity using the dividend capitalization model but what if the firm you are studying does not...

### Today, I tried the Segway i2

Not too long ago, I saw a groupon become available for Segway tours of Chicago. I have always been a little curious about the Segway, so I bought the groupon and talked my sister into coming with me down to Chicago for the tour. Yes, the primary reason for the trip to Chicago was the tour. We were using the Segway i2. My first thought, getting on the thing was that it is really hard to steady yourself. You get more skilled at controlling it, as time goes on but your feet start hurting fast. You are balancing on it, the...

### Got the textbook and syllabus for my upcoming capstone course

Syllabus is over 146 pages long

### How do you show the formulas in Excel?

This is a quick tip. Lets say you are working on developing an equation within a cell in Excel and you find yourself wanting to refer back to how you set up another cell. You can click on the other cell and see the equation but how do you show the value of the cell while it is not selected? Just hit Ctrl + ` on your keyboard. To toggle it off, just hit the combination again. It is as easy as that.

### Bought a bottle of “naturally black spring water” at lunch

Gimmick factor is high but it just tastes like water. Crazy looking but probably won’t buy it again.

### What is the capital asset pricing model?

Last week, we talked about what a company’s beta is. I figured that this week, we would learn about the Capital Asset Pricing Model (CAPM). According to Investopedia, the CAPM is “a model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.” According to the third edition of Corporate Finance: Core Principles & Applications, the CAPM “implies that the expected return on a security is linearly to its beta.” The equation: [pmath size=10]E(R) = R_f + beta * (E(R_m) – R_f)[/pmath] Where: [pmath size=10]E(R)[/pmath] is the Expect Return on a Security [pmath size=10]R_f[/pmath] is...

### What is a company’s beta?

This is a topic that I recently dealt with within an assignment for class. Investopedia defines a company’s beta as “a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.” According to the third edition of Corporate Finance: Core Principles & Applications, when you graph the return on the particular security on theY axis and the return on the market on the X axis, the slope of the line is the Beta. A beta of 1.21 would mean that for every 1% that the market moves, the company would...