FIN 419
Test 2
Problem set 2
Homework: 7, 8
Use the following information to answer questions. Assuming short selling is allowed.
( ) = 12%
( ) =6%
( ) =14%
( ) =12%
= 2.83%
= 1.41%
= 4.24%
= 3.27%
= -1
= 1
= 0
= 0.5
1. For securities 1 and 3
FIN 419
Test 1
Problem set 3
Homework: 3. (B,C) 4. (C)
Expected return and variance (Portfolio)
1. You own a portfolio that is 35% invested in stock X, 20% in stock Y, and 45% in stock Z. The
expected returns on these stocks are 9%, 17%, and 13%, respecti
FIN 419
Test 2
Problem set 1
Homework: 7, 8
Use the following information to answer questions. Assuming short selling is not allowed.
( ) = 12%
( ) =6%
( ) =14%
( ) =12%
= 2.83%
= 1.41%
= 4.24%
= 3.27%
= -1
= 1
= 0
= 0.5
1. For securities 1 a
FIN 419
Test 2
Problem set 3
Homework: 2, 3, 6
Use the following information to answer questions. Assuming short selling is not allowed.
( ) = 12%
( ) =6%
( ) =14%
( ) =12%
= 2.83%
= 1.41%
= 4.24%
= 3.27%
= -1
= 1
= 0
= 0.5
1. Assuming that t
FIN 419
Test 1
Problem set 1
Homework: 2. (B)
Measures of return and risk
1. On February 1, you bought 500 shares of stock in the Francesca Corporation for $34 a share
and two years later you sold it for $45 a share. During each year of your holding perio
FIN 419
Test 3
Problem set 1
Homework: 2, 5, 7, 9
Dividend discount model
1. Suppose you are thinking of purchasing the stock of Moore Oil, Inc. You expect the stock to
pay a dividend of $0.75 per share at the end of Year 1 and $1.75 per share at the end
FIN 419
Test 3
Problem set 2
1. Abbey Taylor, CFA, has been directed to determine the value of Sundancis stock using the
Free Cash Flow to Equity (FCFE) model. Taylor believes that Sundancis FCFE will grow at
25% for years 2016 and 2017, and 12% thereafte
FIN 419
Test 1
Problem set 4
Deriving opportunity sets
1. Assume you can lend and borrow at 10% and have $5,000 in income in each of two periods.
What is your opportunity set?
2. Assume you can lend and borrow at 5% and have $20,000 in income in each of t