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University of California  Berkeley
Haas School of Business
UGBA 103
Sample Midterm
Instructions:
This is a 1.5 hour closed book and closed note exam, though you may refer to notes
on one side of a 3” x 5” index card. There are a total of 120 points. You may use a calculator, but
no computers are allowed. Show all your work. Write down any equation you are using to allow
us to provide as much credit as possible. This test contains 7
pages. The last question is #6
. All
answers should be written in the space provided under each question.
Jargon section:
(6 minutes, 10 points)
In the space provided below
write a brief (one or two sentence) definition or explanation for
each of the following terms:
Preferred Stock:
Real interest rate:
Convertible bond:
Dividend yield:
Discount factor:
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Problem Section:
1.
5 minutes, 10 points (
No
partial credit!
)
You have the following information
Year
Cash Flow
Spot
Rate for the Year
(end of year)
1
C
1
r
1
2
C
2
r
2
3
C
3
r
3
Write down an equation giving the present value of these three cash flows.
2.
12 minutes, 15 points
If the annual percentage rate (APR, compounded monthly) is 12%, what is the present value
today of an instrument paying $10 every 6 months, with the first payment two years from today
and tbe last payment 6 years from today? (In other words, the instrument makes no payments
during its first 2 years.)
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 Fall '07
 Berk
 market capitalization rate, University of California

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