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Unformatted text preview: FIN 397.1: Spring 2007 Exam # 1: Basic Concepts February 6, 2007 NAME: Time allowed: 1 hour, 15 minutes. Maximum possible score: 100. NOTE: • If I cannot understand your calculations, I will not be able to give you full credit even if your final answer is correct. You cannot say “these calculations are obvious.” • If a problem is missing some key information that you think is necessary to solve the problem, please ask me to clarify the question or state your confusions clearly. Alternatively, please make appropriate assumptions, state them clearly and proceed. No credit will be awarded if you fail to state your confusions or assumptions explicitly even if the question is wrong . • Partial credits may be awarded if you show your calculations or provide arguments to support your answers. 1 I Multiple Choice Questions (24 points, 15 minutes) 1. (2 points) The owner of a put option has ———- to ———- a specific stock, on or before a specific date, at a specific price. (a) an obligation, sell (b) an obligation, buy (c) a right, sell (d) a right, buy 2. (2 points) An Initial Public Offering (IPO) in which the underwriter purchases the shares from the issuing firm and takes the risk of selling the shares to the public is referred to as: (a) A firm commitment underwriting (b) A competitive bid underwriting (c) A best efforts underwriting (d) A negotiated bid underwriting 3. (5 points) Suppose that you believe the past performance of a mutual fund is indicative of the mutual fund’s future performance and you believe the returns of a mutual fund reflect the manager’s skill. You are an individual making a single investment decision and you plan to invest your money in the risk-free asset and in one of these three...
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This note was uploaded on 03/30/2010 for the course CH 369 taught by Professor Kbrowning during the Spring '07 term at University of Texas.
- Spring '07