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407ME02

# 407ME02 - Name M.I.T ID or S.S 15.407 Midterm Exam Jiang...

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Unformatted text preview: Name: M.I.T. ID# or S.S.#: 15.407 Midterm Exam Jiang Wang Fall 2002 • The exam lasts 90 minutes. • The exam consists of five questions. Please answer all of them. • Credit for a question is exactly in proportion to the time allotted. Question Points/Minutes 1 /30 2 /15 3 /20 4 /10 5 /15 Total /90 • You are allowed one 8 1 2 ” × 11” sheet of formulas and one calculator. • You are to answer these questions without consulting anyone. • Be neat and show your work. Answers without work receive no credit. Wrong answers with partially correct work may receive partial credit. • Allocate your time optimally. 1. (30 minutes) True, false or uncertain? Briefly explain (or qualify) you answer. (a) The rule to maximize the current market value of the firm assumes that share- holders all agree with the values of the firm’s assets. (b) When people discount a future cash flow to compute its present value, they use different discount rates depending on the rates they can borrow from banks. 1 (c) The price of a Treasury bond is determined by the yield to maturity on other Treasuries with similar maturities....
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407ME02 - Name M.I.T ID or S.S 15.407 Midterm Exam Jiang...

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