Fin550Midterm_2016_Questions_FINAL_Version.pdf - CASE...

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1 CASE QUESTIONS BOOKLET Finance 550 Lee Pinkowitz and Sandeep Dahiya MIDTERM EXAM October 15th, 2016Last Name:___________________________ First 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 11 pages and 7 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 SECTION I: YOU CAN’T HANDLE THE TRUTH!!! OR MAYBE YOU CAN Questions 1-4 (20 points total) True or False, Explain: (20 points total 5 points each question) Use the following information to determine whether the statements are true or false. Check the appropriate box. If the statement is false AND ONLY if it is false provide a BRIEF explanation as to why it is false (BRIEF means AT MOST a few sentences). Show work if necessary. 1.You are going to purchase a motorcycle and are offered the following three loans. You don’t really care about the timing of the payments, but you want the cheapest possible loan. Loan I.12.00% APR compounded monthly. Loan II.12.25% APR, compounded semi-annually Loan III.12.50% APR, compounded annually Statement: You should choose Loan I since it is the cheapest rate. 2.You invest $100 in a mutual fund. Over a ten-year period, the fund delivers an arithmetic average return of 6% per year, with a standard deviation of 8.45% per year. Statement: After 10 years, the value of your investment must be between $178 and $180 3.You have the following data for Boiiiing!! Incorporated, a leading trampoline manufacturer.

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