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3 Pages

Course: FINA 274, Fall 2011
School: GWU
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Word Count: 2041

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4 Chapter problems 1. We need to find the annuity payment in retirement. Our retirement savings ends at the same time the retirement withdrawals begin, so the PV of the retirement withdrawals will be the FV of the retirement savings. So, we find the FV of the stock account and the FV of the bond account and add the two FVs. Stock account: FVA = \$700[{[1 + (.10/12) ]360 1} / (.10/12)] =...

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GWU - FINA - 274
Prepared for The Journal of Applied Corporate Finance Vol. 15, No. 1, 2002How do CFOs make capital budgeting and capitalstructure decisions?1John R. GrahamAssociate Professor of Finance, Fuqua School of Business, Duke University, Durham, NC 27708 USA
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Acquisition Valuation: Seven Stepsback to SanityAswath DamodaranStern School of Business, New York Universitywww.damodaran.comAswath Damodaran1The original title I had was Acquirers Anonymous: Seven Steps to Sobrietybut I decided that it showed my
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VALUATION OF FIRMS INMERGERS AND ACQUISITIONSOKAN BAYRAKDefinitions A merger is a combination of two or morecorporations in which only one corporationsurvives and the merged corporations go outof business. Statutory merger is a merger where theac
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Assignment #2 Valuing a the Target Company of a Corporate Takeover A large food conglomerate is seeking to acquire a wellestablished company in the confectionary (candy) industry. The CFO of the acquiring company is
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Private Company ValuationAswath DamodaranAswath Damodaran179Process of Valuing Private CompaniesnChoosing the right model Valuing the Firm versus Valuing Equity Steady State, Two-Stage or Three-StagenEstimating a Discount Rate Cost of Equity E
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FIN 62751-1Lecture I(Chapters 1- 5)The investment environment Financial markets and instruments Interest rates and risk premiums1-2Chapter 11-3Investments &amp; Financial AssetsEssential nature of investmentReal AssetsReduced current consumption
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Practice Quiz 11. The means by which individuals hold their claims on real assets in a well-developed economy areA.B.C.D.E.Investment assets.Depository assets.Derivative assets.Financial assets.Exchange-driven assets.2. _ are financial assets.
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6-1Lecture II(Chapter 6 (7th/8th/9th edition)6-26-3Risk - Uncertain Outcomesp = .6W1 = \$150Profit = \$50W2 = \$80Profit = \$-20W = \$1001-p = .4E(W) = pW1 + (1-p)W2 = .6 (150) + .4(80) = 1222 = p[W1 - E(W)]2 + (1-p) [W2 - E(W)]2 =.6 (150-122)2
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Chapter 06 - Risk Aversion and Capital Allocation to Risky AssetsCHAPTER 6: RISK AVERSION AND CAPITAL ALLOCATION TO RISKY ASSETSPROBLEM SETS 1. 2. (e) (b) A higher borrowing is a consequence of the risk of the borrowers' default. In perfect markets with
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9-1Lecture III(Chapter 7 (7th/8th/9th edition)9-2The Investment DecisionTop-down process with 3 steps:1. Capital allocation between the riskyportfolio and risk-free asset2. Asset allocation across broad asset classes3. Security selection of indiv
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Chapter 07 - Optimal Risky PortfoliosCHAPTER 7: OPTIMAL RISKY PORTFOLIOSPROBLEM SETS 1. 2. (a) and (e). (a) and (c). After real estate is added to the portfolio, there are four asset classes in the portfolio: stocks, bonds, cash and real estate. Portfol
GWU - FINA - 6275
This file was created by CMPT_IND_RETS using the 201112 CRSP database.It contains value- and equal-weighted returns for 12 industry portfolios.The portfolios are constructed at the end of June.The annual returns are from January to December.Missing da
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FIN 6275Homework 1FIN 6275 (PART I)INVESTMENT ANALYSIS AND GLOBAL PORTFOLIO MANAGEMENTSpring 2012HOMEWORK IPORTFOLIO MANAGEMENTThis homework uses the data that you obtained for the assignment from the Fall which you submittedto me earlier this sem
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FIN 6275 (PART I)Investment Analysis andGlobal Portfolio ManagementPORTFOLIO MANAGEMENTHOMEWORK IALEXANDER ABAWIAMANDA GOLDINMY LAN LESAVANTHI SILVAFEI XIEKUAN-YING CHENFEBRUARY 18, 201211. Analysis of Stand-Alone Risk and Return:a. Plot all
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9-1Lecture IVChapter 9 (7th/8th/9th edition)Capital Asset Pricing Model(CAPM)9-2It is the equilibrium model that underlies allmodern financial theory.Derived using principles of diversificationwith simplified assumptions.Markowitz, Sharpe, Lintn
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9-1Lecture V(Chapters 8&amp;10 (7th/8th edition)9-2Chapter 89-3Advantages of the SingleIndex ModelFIN 6275Reduces the number of inputsfor diversification.Easier for security analysts tospecialize.Lecture V p.39-4Single Factor Modelrit = E ( ri
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DATE1980013119800229198003311980043019800530198006301980073119800829198009301980103119801128198012311981013019810227198103311981043019810529198106301981073119810831198109301981103019811130198112311982012919820226198203311982043
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This file was created by CMPT_IND_RETS using the 201107 CRSP database.It contains value- and equal-weighted returns for 12 industry portfolios.The portfolios are constructed at the end of June.The annual returns are from January to December.Missing da
GWU - FINA - 6275
This file was created by CMPT_IND_RETS_DAILY using the 201107 CRSP database.It contains value- and equal-weighted returns for 12 industry portfolios.The portfolios are constructed at the end of June.Missing data are indicated by -99.99 or -999. Averag
GWU - FINA - 6275
Matlab Homework Two1. Importing financial data into Matlab:(a) Importing data on 12_Industry_Portfolios from January 1980 to July 2011data=dlmread('12_Industry_Portfolios.txt',',[654 1 1032 12])(b) Creating matrix R containing following 6 industries:
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Introduction to MatlabAlexander Philipov, aphilipo@gmu.eduSeptember 3, 20091ObjectivesLearn: The matlab interface: command window, workspace, help browser, matlab data and variable types, operators, functions, types of matlab les and loading data,
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FIN 275 - Investment Analysisand Global Portfolio ManagementQuantitative ReviewProf. Gergana Jostova1Working with MatricesMost nancial applications involve working with a series of asset (stock, bond, portfolio) returns orprices over a period of ti
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Chapter 01 - The Investment EnvironmentCHAPTER 1: THE INVESTMENT ENVIRONMENTPROBLEM SETS 1. Ultimately, it is true that real assets determine the material well being of an economy. Nevertheless, individuals can benefit when financial engineering creates
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Chapter 02 - Asset Classes and Financial InstrumentsCHAPTER 2: ASSET CLASSES AND FINANCIAL INSTRUMENTSPROBLEM SETS1.Preferred stock is like long-term debt in that it typically promises a fixed payment each year. In this way, it is a perpetuity. Prefer
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Chapter 03 - How Securities are TradedCHAPTER 3: HOW SECURITIES ARE TRADEDPROBLEM SETS 1. 2. Answers to this problem will vary. The SuperDot system expedites the flow of orders from exchange members to the specialists. It allows members to send computer
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Chapter 04 - Mutual Funds and Other Investment CompaniesCHAPTER 4: MUTUAL FUNDS AND OTHER INVESTMENT COMPANIESPROBLEM SETS 1. The unit investment trust should have lower operating expenses. Because the investment trust portfolio is fixed once the trust
GWU - FINA - 6275
Chapter 05 - Learning About Return and Risk from the Historical RecordCHAPTER 5: LEARNING ABOUT RETURN AND RISK FROM THE HISTORICAL RECORDPROBLEM SETS 1. The Fisher equation predicts that the nominal rate will equal the equilibrium real rate plus the ex
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Chapter 06 - Risk Aversion and Capital Allocation to Risky AssetsCHAPTER 6: RISK AVERSION AND CAPITAL ALLOCATION TO RISKY ASSETSPROBLEM SETS 1. 2. (e) (b) A higher borrowing is a consequence of the risk of the borrowers' default. In perfect markets with
GWU - FINA - 6275
Chapter 07 - Optimal Risky PortfoliosCHAPTER 7: OPTIMAL RISKY PORTFOLIOSPROBLEM SETS 1. 2. (a) and (e). (a) and (c). After real estate is added to the portfolio, there are four asset classes in the portfolio: stocks, bonds, cash and real estate. Portfol
GWU - FINA - 6275
Chapter 08 - Index ModelsCHAPTER 8: INDEX MODELSPROBLEM SETS 1. The advantage of the index model, compared to the Markowitz procedure, is the vastly reduced number of estimates required. In addition, the large number of estimates required for the Markow
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Chapter 09 - The Capital Asset Pricing ModelCHAPTER 9: THE CAPITAL ASSET PRICING MODELPROBLEM SETS 1. E(rP) = rf + P [E(rM ) rf ] 18 = 6 + P(14 6) P = 12/8 = 1.5 2. If the security's correlation coefficient with the market portfolio doubles (with all ot
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Chapter 10 - Arbitrage Pricing Theory and Multifactor Models of Risk and ReturnCHAPTER 10: ARBITRAGE PRICING THEORY AND MULTIFACTOR MODELS OF RISK AND RETURNPROBLEM SETS 1. The revised estimate of the expected rate of return on the stock would be the ol
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Chapter 11 - The Efficient Market HypothesisCHAPTER 11: THE EFFICIENT MARKET HYPOTHESISPROBLEM SETS 1. The correlation coefficient between stock returns for two non-overlapping periods should be zero. If not, one could use returns from one period to pre
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Chapter 12 - Behavioral Finance and Technical AnalysisCHAPTER 12: BEHAVIORAL FINANCE AND TECHNICAL ANALYSISPROBLEM SETS 1. Technical analysis can generally be viewed as a search for trends or patterns in market prices. Technical analysts tend to view th
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Chapter 13 - Empirical Evidence on Security ReturnsCHAPTER 13: EMPIRICAL EVIDENCE ON SECURITY RETURNSPROBLEM SETS 1. Even if the single-factor CCAPM (with a consumption-tracking portfolio used as the index) performs better than the CAPM, it is still qui
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Chapter 14 - Bond Prices and YieldsCHAPTER 14: BOND PRICES AND YIELDSPROBLEM SETS 1. The bond callable at 105 should sell at a lower price because the call provision is more valuable to the firm. Therefore, its yield to maturity should be higher. Zero c
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Chapter 15 - The Term Structure of Interest RatesCHAPTER 15: THE TERM STRUCTURE OF INTEREST RATESPROBLEM SETS. 1. In general, the forward rate can be viewed as the sum of the market's expectation of the future short rate plus a potential risk (or `liqui
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Chapter 16 - Managing Bond PortfoliosCHAPTER 16: MANAGING BOND PORTFOLIOSPROBLEM SETS 1. While it is true that short-term rates are more volatile than long-term rates, the longer duration of the longer-term bonds makes their prices and their rates of re
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Chapter 17 - Macroeconomic and Industry AnalysisCHAPTER 17: MACROECONOMIC AND INDUSTRY ANALYSISPROBLEM SETS 1. Expansionary (looser) monetary policy to lower interest rates would stimulate both investment and expenditures on consumer durables. Expansion
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Chapter 18 - Equity Valuation ModelsCHAPTER 18: EQUITY VALUATION MODELSPROBLEM SETS 1. Theoretically, dividend discount models can be used to value the stock of rapidly growing companies that do not currently pay dividends; in this scenario, we would be
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Chapter 19 - Financial Statement AnalysisCHAPTER 19: FINANCIAL STATEMENT ANALYSISPROBLEM SETS 1. The major difference in approach of international financial reporting standards and U.S. GAAP accounting stems from the difference between principles and ru
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Chapter 20 - Options Markets: IntroductionCHAPTER 20: OPTIONS MARKETS: INTRODUCTIONPROBLEM SETS 1. Options provide numerous opportunities to modify the risk profile of a portfolio. The simplest example of an option strategy that increases risk is invest
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Chapter 21 - Option ValuationCHAPTER 21: OPTION VALUATIONPROBLEM SETS 1. The value of a put option also increases with the volatility of the stock. We see this from the put-call parity theorem as follows: P = C S0 + PV(X) + PV(Dividends) Given a value f
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Chapter 22 - Futures MarketsCHAPTER 22: FUTURES MARKETSPROBLEM SETS 1. There is little hedging or speculative demand for cement futures, since cement prices are fairly stable and predictable. The trading activity necessary to support the futures market
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Chapter 23 - Futures, Swaps, and Risk ManagementCHAPTER 23: FUTURES, SWAPS, AND RISK MANAGEMENTPROBLEM SETS 1. In formulating a hedge position, a stocks beta and a bonds duration are used similarly to determine the expected percentage gain or loss in th
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Chapter 24 - Portfolio Performance EvaluationCHAPTER 24: PORTFOLIO PERFORMANCE EVALUATIONPROBLEM SETS 1. As established in the following result from the text, the Sharpe ratio depends on both alpha for the portfolio ( P) and the correlation between the
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Chapter 25 - International DiversificationCHAPTER 25: INTERNATIONAL DIVERSIFICATIONPROBLEM SETS 1. International Investing Raises Questions was published in the Wall Street Journal in 1997. Some of the arguments presented in the article may no longer be
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Chapter 26 - Hedge FundsCHAPTER 26: HEDGE FUNDSPROBLEM SETS 1. No, a market-neutral hedge fund would not be a good candidate for an investors entire retirement portfolio because such a fund is not a diversified portfolio. The term marketneutral refers t
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Chapter 27 - The Theory of Active Portfolio ManagementCHAPTER 27: THE THEORY OF ACTIVE PORTFOLIO MANAGEMENTPROBLEM SETS 1. Views about the relative performance of bonds compared to stocks can have a significant impact on how security analysis is conduct
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Chapter 28 - Investment Policy and the Framework of the CFA InstituteCHAPTER 28: INVESTMENT POLICY AND THE FRAMEWORK OF THE CFA INSTITUTEPROBLEM SETS 1. You would advise them to exploit all available retirement tax shelters, such as 403b, 401k, Keogh pl
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IntroductionIntroductionChapter 1Options, Futures, and OtherDerivatives, 7th Edition, Copyright John C. Hull 20081Size of OTC and Exchange-Traded MarketsSize(Figure 1.1, Page 3)Source: Bank for International Settlements. Chart shows total princi
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Mechanics of Futures Markets MarketsChapter 2Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Futures ContractsAvailableon a wide range of assets Exchange traded Specifications need to be defined: What can be delive
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Hedging Strategies Using Futures FuturesChapter 3Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Long &amp; Short HedgesAlong futures hedge is appropriate when you know you will purchase an asset in the future and want
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Interest Rates InterestChapter 4Options, Futures, and Other Derivatives 7th Edition, Copyright John C. Hull 20081Types of RatesTreasuryrates LIBOR rates Repo ratesOptions, Futures, and Other Derivatives 7th Edition, Copyright John C. Hull 20082Me
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Determination of Forward and Futures Prices FuturesChapter 5Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Consumption vs Investment Consumption Assets AssetsInvestmentassets are assets held by significant numbers
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Interest Rate Futures InterestChapter 6Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Day Count Conventions in the U.S. (Page 129) (PageTreasury Bonds: Actual/Actual (in period) Corporate Bonds: 30/360 Money Market
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SwapsSwapsChapter 7Options, Futures, and OtherDerivatives, 7th Edition, Copyright John C. Hull 20081Nature of SwapsA swap is an agreement to exchangecash flows at specified future timesaccording to certain specified rulesOptions, Futures, and O
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Mechanics of Options Markets MarketsChapter 8Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Review of Option TypesAcall is an option to buy A put is an option to sell A European option can be exercised only at the
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Properties of Stock Options PropertiesChapter 9Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Notationc : European call option price p : European put option price S0 : Stock price today K : Strike price T : Life of
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Trading Strategies Involving Options OptionsChapter 10Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 20081Types of StrategiesTakea position in the option and the underlying Take a position in 2 or more options of the sa