Professor Vasudevan
Finance 485
EXAM 2 (SAMPLE PROBLEMS)
1) Consider a six month put option on a stock with a strike price of $32. The current stock price is $30
and over the next six months it is expected to rise to $36 or fall to $27. The risk free rate
Professor Vasudevan
International Finance
EXAM 1 (SAMPLE PROBLEMS)
1) While you were visiting London, you purchased a Jaguar for 35,000, payable in three months.
You have enough cash at your bank in New York City, which pays 0.35% interest per month,
comp
Professor Vasudevan
International Finance
Transactions Exposure
1) . Z Corporation, located in the United States, has an accounts payable obligation of
750 million payable in one year to a bank in Tokyo. The current spot rate is 116/$1.00
and the one year
-Professor Vasudevan
Finance 485
EXAM 2 (SAMPLE SHORT QUESTIONS)
You will have 15 short questions worth 30 points and 5 problems worth 70 points for
the exam
Consider a stock priced at $30 with a standard deviation of .3. The risk-free rate is .05.
There
Professor Vasudevan
International Finance
FOREIGN CURRENCY OPTIONS
1) Citicorp sells a call option on Euros (contract size is Euro 500,000) at a premium of $0.04 per
euro. If the exercise price is $0.91` and the spot price of the euro at date of expiratio
Calculate the sauce share price using the following information
FCF
WACC
Estimate growth
Debt
Number of shares
Initial cash and marketable
securities
Enterprise value
Total asset value
Equity value
Equity value per share
$4,500,000
12.5%
5%
$19,000,000
6,
Calculate the sauce share price using the following information
FCF
WACC
Estimate growth
Debt
Number of shares
Initial cash and marketable
securities
Enterprise value
Total asset value
Equity value
Equity value per share
$4,500,000
12.5%
5%
$19,000,000
6,
A
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2
3
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5
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7
8
9
10
11
12
13
14
15
B
The followings are the income statement and the balance sheets of the Pretty Me Company. Calculate the fre
the company by filling in the highlighted cells in the Free Cash Flow table at the end of the problem.
Profi
A
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7
8
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27
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46
B
The followings are the income statement and the balance sheets of the Pretty Me Company. Calculate the fre
the company by
PORTFOLIO STATISTICS
FOR A KELLOGG-EXXON PORTFOLIO
K
Average, E(rK) and E(rXOM)
Variance, Var(rK) and Var(rXOM)
Sigma, sK and sXOM
Covariance of returns, Cov(rK,rXOM)
Correlation
Portfolio return and risk
Percentage in K
Percentage in XOM
Expected portfol
A
List price of car
Downpayment
Cash cost of car
Bank rate of interest
7
Year
0
8
1
9
2
10
3
11
12
13 Internal rate of return
14
15 NPV of cash saved
16
17
18 Borrowing the money
19
20
21
22
23
C
D
E
BUYING A CAR
1
2
3
4
5
6
B
Year
0
1
2
3
11,000.00
5,000
A
1
2
3
4
5
6
B
C
CALCULATING FUTURE VALUES WITH EXCEL
Initial deposit
Interest rate
Number of years, n
Account balance after n years
100
6%
2
112.36
A
C
D
E
THE FUTURE VALUE OF A SINGLE $100 DEPOSIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
2
A
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2
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5
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10
11
B
UNITED TRANSPORT-WACC
Number of shares
Market price per share
E, market value of equity
D, market value of debt
rE, cost of equity
rD, cost of debt
TC, firm's tax rate
WACC, weighted average cost of capital:
12 WACC=r *E/(E+D)+
Calculate the sauce share price using the following information
FCF
WACC
Estimate growth
Debt
Number of shares
Initial cash and marketable
securities
Enterprise value
Total asset value
Equity value
Equity value per share
$4,500,000
12.5%
5%
$19,000,000
6,
Your local bank has offered you a 20-year, $100,000 loan. The bank is charging 1.5 points when the loan is
given. Payments on the loan are quarterly and are based on a 10% annual interest rate on the full amount
of the loan.
Part A. Calculate the monthly
Your local bank has offered you a 20-year, $200,000 mortgag. The bank is charging 1 point and 0.8% originatio
mortgage are semiannually and are based on a 12% annual interest rate on the full amount of the mortgage.
Part A. Calculate the monthly mortgage
The followings are the income statement and the balance sheets of the Cristal Clear Company. Calculate the
free cash flow for the company by filling in the highlighted cells in the Free Cash Flow table at the end of
the problem.
Profit and loss Statement