5
1.
You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and
you earn a dividend of $3.50. Your HPR was _.
A.
B.
C.
D.
2.
The _ measure of returns ignores compounding.
A.
B.
C.
D.
3.
geometric average return
Chapter 5: Problems 11, 13, 14, & 16
Problem 11
12.34% + 3% = 15.34%
Problem 13
a) R = (1+.8)/(1+.7) 1 = 5.88%
b) rr = 80%-70% = 10% (approximation is higher than real HPR)
Problem 14
a) T-bills: 0.52% + 3% = 3.52%
b) Expected return: 3.55% + 12.34% = 15.
Chapter 7: Problems 1, 2, 3, 4, 5, 9, 10, 11
Problem 1
Increased short-term interest rates
Increased labor costs
Problem 2
Standard deviation
Correlation with returns of the other asset classes
Problem 3
Its variance must be lower than those of all other
Amortization (p 116): process of providing for a loan to be
paid off by making regular principal reductions
Annuity (p 109): level stream of regular payments that lasts
for a fixed number of periods. PV formula on p 110. FV
formula on p 111).
Annuity Due/
Bearer Form (p 481): certificate is basic evidence of ownership, and corporation will "pay the bearer" (ownership not recorded) difficult to recover if lost/stolen, cannot notify of important events because company does not know who owns it
Call Premium (
Angel Investors (p 621): friends/family with little knowledge of products industry and little experience backing start-up companies
Best Efforts (p 629): syndicate acts as an agent, receiving a commission for each share sold but does not purchase the shar
Amortization (p 116): process of providing for a loan to be paid off by making regular principal reductions
Annuity (p 109): level stream of regular payments that lasts for a fixed number of periods. PV formula on p 110. FV formula on
p 111).
Annuity Due/
Bearer Form (p 481): certificate is basic evidence of ownership, and corporation will "pay the bearer" (ownership not
recorded) - difficult to recover if lost/stolen, cannot notify of important events because company does not know who
owns it
Call Premium
Chapter 7: Problems 9, 11, 12, 15, & 16
Problem 9
a) = 13.03%
b) y = .7881
T-bills = .2119
Stocks = .7881*.4516 = .3559
Bonds = .7881*.5484 = .4322
Problem 11
a) Yes, gold should be held as part of portfolio mix
b) If correlation coefficient was 1, no one
Chapter 5: Concept Check 5.1, Problems 5, 6, 8, 10
Concept Check 5.1
a) Nominal Interest Rate = 3% + 8% = 11%
b) The nominal interest rate will increase
Problem 5
a) Demand curve will shift left and reduce equilibrium real rate of interest
b) Supply curve
Chapter 7: Problems 9, 11, 12, 15, & 16
Problem 9
a) = 13.03%
b) y = .7881
T-bills = .2119
Stocks = .7881*.4516 = .3559
Bonds = .7881*.5484 = .4322
Problem 11
a) Yes, gold should be held as part of portfolio mix
b) If correlation coefficient was 1, no one
Chapter 3: Problems 7, 8, 9, 10, Excel 1 & 2
Question 7:
a) ($40 x $0.50 x 1,000) ($10 x 1,000) ($2 x 1,000) = $8,000
b) $8,000/$50,000 = 16%, less than 30%. Yes, there will be a margin call.
c) ($8,000-$20,000)/$20,000 = -60%
Question 8
a) $50.25
b) $51.
Chapter 1
Question 2: Because highly developed markets have laws and regulations, a developed banking industry,
and a large number of investors.
Question 4: If there were no markets to trade financial assets, companies would have a difficult time
raising
Repurchase Agreements- Repos
1-What is a repo?
A repo is a contractual agreement between two parties in which one party agrees to sell securities to
another party at a specified price with a commitment to buy the securities back at a later date for
anothe
12
1.
A top-down analysis of a firm's prospects starts with an analysis of the _.
A.
B.
C.
D.
2.
In 1980 the dollar to yen exchange rate was about $0.0045. In 2007 the yen to dollar exchange rate was
about 121 yen per dollar. A Japanese producer would hav
14
1.
Which of the following assets is most liquid?
A.
B.
C.
D.
2.
Cost of goods sold refers to _.
A.
B.
C.
D.
3.
Cost of goods sold
General and administrative expenses
Debt interest expense
Tax expenditures
Firm A acquires Firm B when Firm B has a book v
1
1.
Financial assets represent _ of total assets of U.S. households.
A.
B.
C.
D.
2.
Real assets in the economy include all but which one of the following?
A.
B.
C.
D.
3.
mutual fund shares
real estate
pension reserves
corporate equity
According to the Fl