1. 1. What would average market makers fair value for the two stocks around the
time period (say between 11:00 and 11:59) when Greg was negotiating with
Goldman and Kidder?
The market makers fair value for Tandem was $15.00. The buying price was $14 and
t
Harvard Business School Case: T Rowe Price Case Questions
Note: all case questions are based on real world situations. Therefore, they do not
have solutions that can be directly found from text book. Solve these questions
require your creative thinking ba
Problem Set 4:
Solutions
RES 3400
3/28/2016
Question 1
Given the following information, what is the total cash flow to Class A investors in year 1? (State your answer
as a positive number, rounded to the nearest cent.)
A CMO is being issued with 3 tranc
Chapter 04 - Mutual Funds and Other Investment Companies
CHAPTER 04
MUTUAL FUNDS AND OTHER INVESTMENT COMPANIES
1. Mutual funds offer many benefits. Some of those benefits include the ability to invest
with small amounts of money, diversification, profess
1.
Risk that can be eliminated through diversification is called _ risk.
A. uniqu
e
B. firmspecific
C. diversifiab
le
D. all of these
options
2.
The _ decision should take precedence over the _ decision.
A. asset allocation; stock
selection
B. bond select
I N V E S T M E N T S
PROFESSOR XI DONG
Part 2: Investing
DFA and AQR
Section 2
Section 2
Understanding the Size, Value, and
Momentum Effects
(1) How should one efficiently price a stock
or judge whether a stock is efficiently priced?
Rational and efficie
I N V E S T M E N T S
PROFESSOR XI DONG
Part 1: Trading
Case at the T. Rowe Price Trading Desk
Section 1: Overview
Background Introduction
A short but very classic case
An event in 1984, 28 years ago. Much of the forces in the case
are still working the
3
1.
Underwriting is one of the services provided by _.
A.
B.
C.
D.
2.
Under firm commitment underwriting the _ assumes the full risk that the shares cannot be sold to the
public at the stipulated offering price.
A.
B.
C.
D.
3.
$90,000
$1,290,000
$2,390,0
Finance 3710 Investment Analysis
Professor: Lin Peng
Email: [email protected] Phone: (646) 312-3491
Office: VC 10-259
Office hour: W 1:30-2:30pm or by appointment.
Overview
The objective of this course is to provide a rigorous and an integrated fra
Sample Questions for Final Exam
Which of the following risks are associated with high expected returns:
I. Poor performance during recessions but superior performance during
expansions
II. The risk that the security may become suddenly non-tradable or can
Chapter 14 - Financial Statement Analysis
CHAPTER 14
FINANCIAL STATEMENT ANALYSIS
1. N
a. Inventory turnover ratio in 2009.
= 2850 / (490 + 480) x .5 = 1.47
b. Debt equity ratio in 2009.
= 3340 / 960 = 3.48
c. Cash flow from operating activities in 2009.
Score: 150
10.
out of 150 points (100%)
award:
10 out of
10.00
points
I am buying a firm with an expected perpetual cash flow of $850 but am unsure of its risk. If I think the beta
of the firm is zero, when the beta is really 1, how much more will I offer
Review for Exam 1
Instructions: Please read carefully
The exam will have 25 multiple choice questions and 5 work problems covering
chapter 1, 2, 3, 4, 14, 16.
Questions in the multiple choice section will be either concept or calculation
questions. The ca
Score: 120
9.
out of 120 points (100%)
award:
10 out of
10.00
points
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market f
8/19/14&
Chapter 7. Capital Asset Pricing
Model and Arbitrage Pricing
Theory
Ch7. Capital Asset Pricing Model
and Arbitrage Pricing Theory
Part 1. CAPM model: CAL and SML
Part 2. Index models
Part I. Arbitrage and Multi-factor models
Part3. CAPM model:
FIN 3710 - FINAL EXAM (Professor Droussiotis)
Name:
FILL EVERY LIGHT YELLOW BOX BELOW - DO NOT INSERT ROWS OR COLUMNS
SECTION I - BOND ANALYSIS (25 POINTS)
Question 1 (10 points)
Given the following data, calculate the YTM, YTC for year 3:
Settlement Date
Score: 120
6.
out of 120 points (100%)
award:
10 out of
10.00
points
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market f
Score: 150
12.
out of 150 points (100%)
award:
10 out of
10.00
points
The market consensus is that Analog Electronic Corporation has an ROE = 9% and a beta of 1.95. It plans
to maintain indefinitely its traditional plowback ratio of 2/5. This year's earni
Score: 80
1.
out of 80 points (100%)
award:
10 out of
10.00
points
Suppose that in a wave of pessimism, housing prices fall by 10% across the entire economy.
a. Has the stock of real assets of the economy changed?
No
b. Are individuals less wealthy?
Yes
e
Score: 80
6.
out of 80 points (100%)
award:
10 out of
10.00
points
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares
outstanding at time t. Stock C splits two-for-one in the last period.
A
B
C
P0
81
Score: 120
7.
out of 120 points (100%)
award:
10 out of
10.00
points
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market f
Score: 80
7.
out of 80 points (100%)
award:
10 out of
10.00
points
Consider the three stocks in the following table. Pt represents price at time t, and Qt represents shares
outstanding at time t. Stock C splits two-for-one in the last period.
A
B
C
P0
95
Chapter 05 - Risk and Return: Past and Prologue
CHAPTER 05
RISK AND RETURN: PAST AND PROLOGUE
1. The 1% VaR will be less than -30%. As percentile or probability of a return declines so
does the magnitude of that return. Thus, a 1 percentile probability wi
Practice questions: Quiz 3
FIR 3710
1. If the daily returns on the stock market are normally distributed with a mean of 0.05%
and a standard deviation of 1.00%, the probability that the stock market would have a
return of -23.00% or worse on one particula
Score: 80
8.
out of 80 points (100%)
award:
10 out of
10.00
points
A T-bill with face value $10,000 and 79 days to maturity is selling at a bank discount ask yield of 2.6%.
a. What is the price of the bill? (Use 360 days a year. Do not round intermediate
Score: 110
10.
out of 110 points (100%)
award:
10 out of
10.00
points
Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation
of 29%. The T-bill rate is 5%.
Your risky portfolio includes the following inves
Score: 80
2.
out of 80 points (100%)
award:
10 out of
10.00
points
Lanni Products is a start-up computer software development firm. It currently owns computer equipment
worth $30,000 and has cash on hand of $20,000 contributed by Lanni's owners.
Lanni ta
Risk and Return: Past and Prologue
1. The holding period return is the rate at which the investor's funds have grown
over the _.
a.
last year
b.
last quarter
c.
last month
d.
investment period
2. The _ average ignores compounding.
a.
geometric
b.
arithmet
Score: 150
15.
out of 150 points (100%)
award:
10 out of
10.00
points
Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the
inflation rate, IR. IP is expected to be 3% and IR 7%. A stock with a beta
Score: 110
2.
out of 110 points (100%)
award:
10 out of
10.00
points
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $90 per share.
The initial margin requirement was 50%. (The margin account pays no interest.) A yea
HOMEWORK #4
Name:
Use information from the www.finance.yahoo.com website to find the latest Enterprise
Value (EV) for IBM (use the close stock Price for December 31, 2016 and the December
31, 2016 financials reported for the total debt (short-term and lon
FIN 3710
Chapter 1:
Real assets vs. Financial assets
Real assets: land, buildings, machines, and knowledge that can be used to
produce goods and services
Financial assets: stocks and bonds/ claims to the income generated by real
assets
Financial asset
I N V E S T M E N T S
PROFESSOR XI DONG
Part 2: Investing
Market Efficiency beyond Fama-French 3 Factors
Versions of Efficient Market Hypothesis
Versions of EMH (Fama (1970)
Weak-form EMH
Semistrong-form EMH
Stock prices already efficiently reflect all in
I N V E S T M E N T S
PROFESSOR XI DONG
Part 2: Investing
DFA and AQR
Section 2: Market Efficiency vs. Inefficiency or
Rational vs. Behavioral
Rational behavior and efficient price
(Size and Value)
Efficiency doesnt mean return is unpredictable: Fama (19
I N V E S T M E N T S
PROFESSOR XI DONG
Part 2: Investing
Liquidity and Market Efficiency
Learning points
1. Illiquidity and bond valuation
2. Liquidity risk, market efficiency and limits to arbitrage
3. Insure against black swan events in the market
B