Fin550Midterm_2014_questions_booklet.pdf - CASE QUESTIONS...

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1 CASE QUESTIONS BOOKLETFinance 550 Sandeep Dahiya and Lee Pinkowitz MIDTERM EXAM October 18th, 2014 Name:__________________________________________________ Please read the following instructions carefully: (i)Put all your solutions and work on the ANSWER SHEETS, NOTon these pages. You can use these pages for scratch work, but nothing written here will be graded.(ii)Read the questions completely and carefully. Make sure you understand what is being asked before launching into calculations. It is possible that you are given more information than needed. (iii)For dollar figures, you can round to the nearest cent. For rates, carry computations out 4 places (i.e. 0.0123 =1.23%) (iv)Check that there are 9 pages and 5 sections in your CASE QUESTIONS booklet (v)You may have at your desk a pen, pencil, a pocket calculator and ONE side of a formula sheet. There is to be NO sharing of calculators or case questions. You may not use laptops or PDAs for the test. You cannot use your calculator manual. (vi)Allocate your time wisely. Use the number of points assigned to each question as your guide. (vii)GOOD LUCK
2 Questions 1-2 (20 points total) True or False, Explain: (20 points total 10 points each question) Use the following information to determine whether the statements are true or false. If the statement is false provide a BRIEF explanation as to why it is false (BRIEF means AT MOST a few sentences). For a statement to be true, it must always be true. Thus, if the statement is true, there is no need for further explanation. Show work if necessary. 1.With positive cash flows and interest rates, holding everything else constant, the higher the frequency of compounding, the lower the present value of a stream of cash flows. (10 points)2.Given the information in the table below, an equally weighted portfolio of stocks A, B, and C has a standard deviation equal to 10% (10 points)Stock Expected Return Standard Deviation Correlation with A Correlation with B Correlation with C A 12% 10% B 12% 10% C 12% 10% 0 SECTION I: DID TUITION BUY YOU INTUITION? 1 0 1 0 1
3 SECTION II: TIME AND MONEY…BUT NOT THE PINK FLOYD SONGS

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