The intuition behind linear regression can be difficult for students to grasp particularly without a readily accessible context. This paper uses basketball statistics to demonstrate the purpose of linear regression and to explain how to interpret its results. In particular, the student will...

Using a “plug” figure or “slack term” within a pro forma analysis is the standard method to make a forecasted balance sheet have assets equal liabilities and equity. The plug is usually stock or long-term debt because either one or a combination of the two, are assumed to be the source...

Pricing bonds is generally one of the earliest applications of time value of money in a finance curriculum. A bond price incorporates the use of an annuity and an individual discounted cash flow while also being a “fundamental” financial security. This paper works through the pedagogy of...

The Student Loan Marketing Association, “Sallie Mae,” was formed by the federal government in 1972 to facilitate a secondary market for student loans. Now an independent entity, SLM Corporation is the largest lender and servicer of student loans in the U.S. As Sallie Mae made the transition...

Arnold, Crack and Schwartz (ACS) (2010) generalize the Rubinstein (1994) risk-neutral implied binomial tree (R-IBT) model by introducing a risk premium. Their new risk-averse implied binomial tree model (RA-IBT) has both probabilistic and pricing applications. They use the RA-IBT model to...

The matrix algebra associated with finding minimum variance portfolio weights and tangency portfolio weights is greatly simplified by using an Excel presentation. A further simplification of the tangency portfolio weights process is also presented using excess returns for the risky securities....

Financial statements and an accompanying NPV calculation are embedded into a binomial tree. This generalization of traditional static NPV analysis allows the financial statements to both evolve through time and, at any given time, to vary with states of the world (similar to a Monte Carlo...

Arnold, Crack and Schwartz (2010) generalize the Rubinstein (1994) risk-neutral implied binomial tree (R-IBT) model by introducing a risk premium. Their new risk-averse implied binomial tree model (RA-IBT) has both probabilistic and pricing applications. They use the RA-IBT model to estimate the...