Basic
1. Suppose you've estimated that the fifth-percentile value at risk of a portfolio is 30%. Now
you wish to estimate the portfolio's first-percentile VaR (the value below which lie 1% of the
returns). Will the 1% VaR be greater or less than 30%?(LO 5

Basic
1. In what circumstances would you choose to use a dividend discount model rather than a free
cash flow model to value a firm?(LO 13-4)
2. In what circumstances is it most important to use multistage dividend discount models rather
than constant-gro

Chapter 6
Basic
1. In forming a portfolio of two risky assets, what must be true of the correlation coefficient
between their returns if there are to be gains from diversification? Explain.(LO 6-1)
2. When adding a risky asset to a portfolio of many risky

Midterm BMGT 343 (Fall 2013)
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Journal 2 Topic 2
Burns and Haga argue that certified management accountants are not genuine
professionals. They argue this on their basis of their Intimidation Model. In this
model, Burns and Haga argue that genuine professionals have the capacity to
int

Reflective Journal Entry 1
In Rosss objection to utilitarianism, to me, it seems like he is saying why someone
would produce the maximum good if the person does not receive the benefit or why
would someone fulfill this duty if they do not get the benefit.

Investments
BMGT343
Xiaohui Gao
Problems on diversification
2
Problem 1
E(r) =
E(r) =
(0.5 x 15%) + (0.4 x 10%) + (0.1 x 6%)
12.1%
6-3
Problem 2
Criteria 1:
Eliminate Fund B
Criteria 2:
Choose Fund D
Lowest correlation,
best chance of
improving return
per

Problems on equity valuation
Example 1
Brennan Company just paid a dividend of
$1.40 per share on its stock. The dividends are
expected to grow at a constant rate of 6%
indefinitely. If investors require a 12% required
rate of return, what is its current

Problems for Chapter 8
8-1
Problem 1
Zero, otherwise returns from the prior period
could be used to predict returns in the
subsequent period.
8-2
Problem 2
No. Why?
One would have to show that Intel investors
earned a higher rate of return than they
sh

INVESTMENTS
BMGT343
Xiaohui Gao
PROBLEMS ON RISK AND RETURN
2
PROBLEM 1
V(12/31/2004)
=V
(1/1/1998)
x (1 + GAR)7
$140,710.04
7
= $100,000 x (1.05)
=
3
5-3
PROBLEM 2
4
5-4
PROBLEM 2
a. The holding period returns for the three
scenarios
(50are:
40 + 2)/40

INVESTMENTS
BMGT343
Xiaohui Gao
PROBLEM 1, HOW MUCH MONEY IS NEEDED?
An entrepreneur needs to raise money to
finance the operations of her start-up over
the next 3 years, after which her venture will
become self- financing. She estimates that
she will req

Chapter 9
Selected Problems
9-1
Problem 1
a.
The prices of growth stocks may be consistently bid too high due to investo
r overconfidence.
Investors/analysts may extrapolate recent earnings (and dividend) growth t
oo far into the future and thereby infl

INVESTMENTS
BMGT343
Xiaohui Gao
PROBLEMS ON BOND AND BOND
VALUATIONS
2
EXAMPLE 1
Consider a bond with a settlement date of
February 22, 2010, and a maturity date of
March 15, 2018. The coupon rate is 5.5%. If
the yield to maturity of the bond is 5.34%
(bo

Midterm BMGT 343 (Spring 2016)
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Midterm BMGT 343 (Fall 2014)
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Name:_KEY_
Section: _
Investments
BMGT343 0301 & 0501
Prof. Padhi
Mid-Term Exam #1
March 9, 2015
Neatly show all work, including the calculators financial function buttons.
Enter your final answers in the blanks provided.
Round to the nearest one-hundredt

Name:_ANSWER KEY_
Section: _
Investments
BMGT343 0301
Prof. Padhi
Mid-Term Exam #1
October 21, 2014
Neatly show all work, including the calculators financial function buttons.
Enter your final answers in the blanks provided.
There are 100 possible points.

8. The parameters of the opportunity set are:
E(rS) = 15%, E(rB) = 9%, S = 32%, B = 23%, = 0.15, rf = 5.5%
From the standard deviations and the correlation coefficient we generate the covariance
matrix [note that Cov(rS, rB) = SB]:
Bonds
Stocks
Bonds
529.

Chapter 5 Solutions (Homework #2)
6. We use the below equation to calculate the holding period return of each scenario:
HPR =
Ending Price Beginning Price + Cash Dividend
Be ginning Price
The holding period returns for the three scenarios are:
Boom:
(50

How to Select Among
the Portfolios in the
Opportunity Set
Elton & Gruber
Chapter 11
Objective Functions
I.
Classical Markowitz
R
Trade-off is not explicitly made.
II. Trade-off explicit:
A. Use utility function
R
High Utility
Low Utility
Very risk averse

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Midterm BMGT 343 (Spring 2015)
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Midterm BMGT 343 (Spring 2015)
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Midterm BMGT 343 (Spring 2014)
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Midterm BMGT 343 (Spring 2016)
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Midterm BMGT 343 (Fall 2013)
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examination.
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Midterm BMGT 343 (Fall 2014)
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