Midterm Exam Spring 2006 Key

Midterm Exam Spring 2006 Key - Finance 748 Professor Bill...

Info icon This preview shows pages 1–3. Sign up to view the full content.

Finance 748 Professor - Bill Reese Midterm Exam Spring, 2006 Instructions : The first five pages consist of four problems. The first two are worth 20 points each and the second two are worth 10 points each. You need to show your work for problems 1 and 4 as well as part 2 of problem 3. You may use Excel for any of these problems, but in each case, you must start with a blank workbook. If anything else appears on your screen, it will be considered a violation of the honor code. The next four pages contain eight short-answer questions. Each question is worth five points. You should be able to answer each question in a couple of paragraphs, but if you need extra space, continue working on the back of the page and leave me a note on the front that you are doing so. The formula for Bayes Rule as shown in class is: Pr (P H | buy) = . Pr (buy | P H ) Pr (P H ) . Pr (buy | P H ) Pr (P H ) + Pr (buy | P L ) Pr (P L ) Come to the front to see me if you have any questions. You have until 9:30 to complete this test. I will post your grade for this exam and the course on the website by your number as soon as I have them all graded. Good luck! Name : _____________________________________________
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

1. Trading Models Problem (1,2,5: 4 pts. each; 3,4: 8 pts. each) You are the NYSE specialist for Time Warner Stock (ticker symbol TWX). Due to the possible implementation of some suggestions made by Carl Icahn, you believe that at this time next year, TWX will be worth either $30 per share, or $20 per share with equal probability. The risk-based required rate of return has already been included in the probabilities, so you can assume that the required return is
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern