MBA Quant Experience

This video is just incredibly creative and educational, highlighting different approaches of the economists John Maynard Keynes and F.A. Hayek to managing the economy. 

I've devoted years to teaching and designing learning materials.  If you come to my classroom or online course motivated to learn then I can help you.  But creating the motivation?  I don't focus on that because it's already there for my students. 

The brilliance of this video is that it has the capacity to generate the motivation to learn about economics in a very broad, and potentially young, general audience.  I hope that the video's creators John Papola and Prof. Russ Roberts do more.

Learn more at www.econstories.tv

The Monday MBA Math series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

The normal distribution is essentially the familiar symmetrical bell curve that characterizes many phenomena.  Even when distributions of interest are asymmetrical, the normal distribution is central to sampling and confidence intervals that help guide efforts to make sense of massive data sets by working with representative data samples.  Working with the normal distribution highlights the importance of thinking about intervals measured by units of standard deviations away from the mean.

Hal Varian, Chief Economist at Google, was recently quoted in the New York Times from a McKinsey Quarterly interview as saying "that the sexy job in the next 10 years will be statisticians."  Perhaps more on point for MBAs, Tom Davenport and Jeanne Harris are releasing "Analytics at Work: Smarter Decisions, Better Results" this month as a follow up to their influential 2007 book Competing on Analytics.  Understanding normal distributions is a core skill in developing the statistical numeracy required to apply analytics to strategy.

Exercise:

Suppose the daily customer volume at a call center has a normal distribution with mean 4,600 and standard deviation 950. What is the probability that the call center will get fewer than 3,400 calls in a day?

Click here to view a standard normal (z-score) table, if you know how to use it.

Solution (with audio commentary): click here

Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).

The Monday MBA Math series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

The market interaction of supply and demand is one of the classic business concepts that people encounter from school snack swaps to shopping at the mall, from start ups to too-big-too-fail banks, and from subprime real estate to U.S. Treasury bond auctions.

The concepts can be used qualitatively and quantitatively.   Like much in economics, supply and demand can be introduced equivalently in pictures or with equations. 

Here, we use equations for a situation involving a perishable agricultural commodity market.

Exercise:

Assume that the demand curve D(p) given below is the market demand for apples:

Q = D(p) = 270 - 15p, p > 0

Let the market supply of apples by given by:

Q = S(p) = 42 + 15p, p > 0

where p is the price (in dollars) and Q is the quantity. The functions D(p) and S(p) give the number of bushels (in thousands) demanded and supplied.

What is the consumer surplus at the equilibrium price and quantity?

Solution (with audio commentary): click here

Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).

The Monday MBA Math series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

The first MBA Math accounting exercise explained that balance sheets provide a snapshot of a firm's financial condition at a moment in time, with "balance" referring to the equality between the left side's assets and the right side's combination of liabilities and equity.  The second accounting exercise introduced transactions as the means by which the balance sheet changes over time.  As long as the balance sheet equation (assets = liabilities + equity) is maintained for each transaction then the new balance sheet that results from a large sequence of transactions will remain in balance. 

This exercise introduces journals and t-accounts as recording systems to handle the volume of transactions that companies generate.  Modern accounting recording systems are automated, of course, but putting pencil to paper with journals and t-accounts helps beginning students to internalize the logic of accounting.

Spending time in the accounting trenches working with transactions is critical to developing an informed understanding of the financial statements that MBAs will analyze in their classes and careers. 

Exercise:

Transfer the journal entries to T-accounts for the transactions below, compute closing amounts for the T-accounts, and construct a final balance sheet to answer the question.

Journal amounts in thousands

What is the final amount in Total Assets?

Solution (with audio commentary): click here

Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).

Goizueta Business School at Emory University requires MBA Math for one year, two year, and evening program students.

The Monday MBA Math series returns after a break since mid-July for classroom teaching.  The series helps prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

As described in the first three Monday MBA Math finance exercises, quantitative finance builds incrementally.  The first and second finance exercises deal with converting a single amount of money at one point in time into a different single amount at a different time.  The third exercise, covering constant annuities, deals with converting multiple future cash flows into a single current cash flow.   

Bonds, which we cover in this lesson, combine a steady stream of small, periodic coupon payments with a single large payment in the last period.  The coupon payments, typically paid every six months, are a constant annuity and the single large payment is a future value. 

Companies and governments (local, state, and national) raise money by issuing bonds, typically for long-term projects.  The key to valuing bonds is determining the appropriate discount rate to reflect the chance that the borrower will default and fail to pay the borrowed money.

The bond market can turn quickly on companies or governments that appear vulnerable financially.  President Bill Clinton's advisor James Carville famously captured the immense power of the bond market when he quipped that if he could be reincarnated he wanted to come back as the bond market.  Understanding bonds begins with the mechanics underlying this exercise.

Exercise:

What is the current value of a $1,000 bond with a 10% annual coupon rate (paid semi-annually) that matures in 5 years if the appropriate stated annual discount rate is 12%?

Solution (with audio commentary): click here

Prof. Peter Regan created the self-paced, online MBA Math quantitative skills course and teaches live MBA courses at Dartmouth (Tuck), Duke (Fuqua), and Cornell (Johnson).

More Schools: During 2009, MBA Math helped approximately 4,000 students to build a solid pre-MBA quantitative foundation. Fifteen schools purchased subscriptions for their incoming full-time (10), part-time (4), and/or executive (9) MBA program students, up from 12 in 2008. Notably, six schools purchased MBA Math subscriptions for the first time in 2009 for their Executive MBA students, building greater awareness away from the full-time program format where the course originated. Numerous other schools recommend or require that their students purchase MBA Math subscriptions.

More Problem Solving: Reflecting MBA Math's active problem solving focus, students submitted solutions to 590K exercises in 2009, bringing the cumulative total over four years to 1.4M.

Greater Student Proficiency: Demonstrating proficiency gains that position students for success when first-year classes start, across 60K quizzes submitted in 2009, the average pre-quiz score of 57% rises to an average post-quiz score of 91%.

Admitted Students Joined by Applicants and Enrolled Students: Among individual subscription purchases, applicants represent 28%, admitted students 57%, and enrolled students 15%. Applicants often submit MBA Math transcripts to bolster their admissions package, sometimes at the request of admissions officers seeking demonstrated proficiency with MBA quant skill basics.

Live Teaching Shapes Material: Live multi-day courses, at Dartmouth (Tuck) and Cornell (Johnson), coupled with a Forté Foundation workshop, continue to shape the course material.

Thanks to students, faculty, and administrators who support MBA Math and provide suggestions. Special thanks to current and former students who serve on the MBA Math Board of Advisors.

I was in Ithaca, New York in early August for the third year to teach a 3-day Quantitative Skills Course for about 75 incoming first years of Cornell's Johnson School.  We covered topics in finance, economics, marketing, and accounting.  Students completed six introductory lessons of online pre-work at mbamath.com, thereby allowing us to proceed deeper into the subjects in the classroom.  Topics from the ongoing financial crisis connected the quantitative basics to the business news headlines.

With the rest of the first year class arriving the following weekend, the Quant Skills students get back into the student groove, start friendships, and explore the restaurants and watering holes of Collegetown and downtown Ithaca.

Two second-year TAs and a recent graduate instilled a healthy mix of anticipation and fear about the challenges of the first year core.

Having recently completed several months of classroom teaching at Cornell's Johnson School and Dartmouth's Tuck School after supporting the intense summer online MBA Math rush of incoming students, I can now gather my thoughts.  I am taking a break this year from teaching Professional Decision Modeling at Duke's Fuqua School during winter term. 

Instead, I'll be refining and extending the MBA Math online course using ideas that have emerged from classroom teaching.

Mendoza College of Business at the University of Notre Dame purchased MBA Math subscriptions for all incoming Chicago Executive MBA program students, extending its existing use of MBA Math for the one year and two year program students.

Boston University purchased MBA Math subscriptions for incoming executive MBA program students.

Friends at the Forté Foundation asked that I post the following about their upcoming Forte Forums.  From my experience at their past two Women's Conferences in New York, they run a first-class event.

Thinking about an MBA?  Register today for a Forté Forum, the largest MBA event designed for women interested in pursuing an MBA.  This fall's Forum series will be held in various locations throughout the United States.

Attend a Forté Forum in the city nearest you to:

• Learn about the career opportunities enabled by an MBA degree
• Connect with representatives from top business schools to help you get started on the admissions process
• Network with women like yourself who are also interested in pursuing an MBA
• Hear first-hand from a panel of women who’ve already received their MBA

Sept. 14: Washington, DC
Sept. 15: Atlanta
Sept. 21: San Francisco
Sept. 22: Los Angeles
Sept. 23: Chicago
Sept. 29: New York City I
Sept. 30: New York City II
Oct. 1: Boston

Pamplin College of Business at Virginia Tech purchases purchased MBA Math subscriptions for incoming executive MBA program students.

Kenan-Flagler Business School at University of North Carolina purchased MBA Math subscriptions for all incoming Weekend Executive MBA program students.