TIPS: Treasury Inflation Protected Securities
William L. Silber
TIPS issued by the U.S. Treasury have the nice property that the return is protected
against changes in the rate of inflation as measured by the Consumer Price Index.
Here is a simple numeric

William L. Silber
Foundations of Finance (B01.2311)
Spring 2012
PROBLEM SET SOLUTIONS
Problem Set I
Problem 1
A) You have sold 10,000 shares at the offer price of 102 1/2. You bought 4,000 shares at a bid
price 102 1/4. Thus, 6,000 shares are sold short (

William L. Silber
Foundations of Finance (B01.2311)
Spring 2012
PROBLEM SET SOLUTIONS
Problem Set II
Problem 1
A)
i)
Security 2 has a higher return than Security 1 (R2=.16 while R1=.10)
ii)
Security 1 has a lower variance of return, and thus has lower ris

William L. Silber
Foundations of Finance (B01.2311)
Spring 2012
PROBLEM SET SOLUTIONS
Problem Set III
Problem 1
A) For annual compounding recall that PV(1+r)t = FV. It is given that the one-year rate
(tR1 or r1 for short) is 10%, and the future value is 1

William L. Silber
Foundations of Finance (B01.2311)
Spring 2012
COMPLETE PROBLEM SET
QUESTIONS
Page
PROBLEM SET I
3
PROBLEM SET II
5
REAL TIME EXERCISE: EQUITIES
9
PROBLEM SET III
10
PROBLEM SET IV
13
INTRODUCTION
These problem sets are not representative

William L. Silber
Foundations of Finance (B01.2311)
Spring 2012
PROBLEM SET SOLUTIONS
Problem Set IV
Problem 1
For each part of this answer you must construct a separate table for the profit on the
position. Complete tables are given for (a) and (b) while

Foundations of Finance
Prof. Alexi Savov
Concept Questions 1 to 12
Concept questions for class 1
Question 1
Which of the following is not a real asset?
a.
b.
c.
d.
Human capital
The software behind Google's search engine
A dollar bill
A gold coin
Question

Extra Challenging
Final Practice Questions
Alexi Savov
I consider the questions in this document to be very challenging as they combine two or
more concepts we have encountered throughout the semester. I encourage you to try them
after you have solved the

Suggested Practice Problems
Here is a list of suggested problems from the class textbooks. These are meant to help
you review the material. Feel free to look up answers when you are finished working on
a set of problems.
BKM refers to Bodie, Kane, and Mar

Thiscopyisforyourpersonal,noncommercialuseonly.Toorderpresentationreadycopiesfordistributiontoyourcolleagues,clientsorcustomersvisit
http:/www.djreprints.com.
http:/www.wsj.com/articles/thedyingbusinessofpickingstocks1476714749
MARKETS
The Dying Business

Extra Challenging
Midterm Practice Questions
Alexi Savov
I consider the questions in this document to be very challenging as they combine two or
more concepts we have encountered throughout the semester. I encourage you to try them
after you have solved t

Foundations of Finance: List of Concepts for Midterm
Prof. Alexi Savov
1) Financial instruments
a. Types of financial instruments
2) Financial markets, trading
a. Order types: market order, limit order
b. How market makers set prices
3) Time value of mone

William L. Silber
Foundations of Finance (B01.2311)
Law of One Price Arbitrage Examples
1. CATs vs. TIGRs
Data:
(a) One YR CAT is priced at $94.34 per $100 (YTM = 6%)
(b) One YR TIGR is priced at $95.238 per $100 (YTM = 5%)
(c) Fee charged (earned) for bo

Foundations of Finance (B01.2311)
William L. Silber
Market Tracking Assignment
I. Objective
To help you become familiar with current trends in financial markets, you are expected to keep a
record of key financial data. There will be two questions on the m

Foundations of Finance (B01.2311)
Spring 2012
William L. Silber
Homepage: www.stern.nyu.edu/~wsilber
Email: [email protected]
SYLLABUS
Texts
(BKM) Bodie, Kane and Marcus, Essentials of Investments, 8th edition, Irwin, 2010.
(RWJ) Ross, Westerfield and

Problem Set 1 Foundations of Finance, Summer 2016
Due: Start of class, May 23
1. You are among the OTC marketmakers in the stock of BioEngineering, Inc. and quote
a bid of 102 1/4 and an ask of 102 1/2. Suppose that you have zero inventory.
(a) On Day 1 y

Foundations of Finance
HW 2
Due beginning of class June 6
1. A risk-free zero coupon bond pays $1,000 in six years.
(a) The risk-free rate is currently 10% effective annual. What should the current
price of the bond be?
(b) Suppose the bond currently cost

Unit 3 notes
Peterson - The Presidents Dominance in Foreign Policy Making
President is often blamed for focusing more on foreign affairs than domestic issues.
Why is the President dominant in US Foreign policy making?
o Despite blurring of foreign and d

Foundations of Finance
Solutions to Homework 1
Professor Theresa Kuchler
Fall 2016
Topic 1: Financial Markets
1. You are among the OTC marketmakers in the stock of BioEngineering, Inc. and quote
a bid of 102 1/4 and an ask of 102 1/2. Suppose that you hav

H23
Duration: Formulas and Calculations
Foundations of Finance
Prof. Alexi Savov
1
Definition
Pn
D=
2
Ct
t=1 (1+r)t
Pn
Ct
t=1 (1+r)t
t
.
Explicit Sample Calculations
a. For an 8% coupon (annual pay) four-year bond with a yield to maturity of 10% we have

Foundations of Finance
Prof. Alexi Savov
Handouts
The handouts guide you through some of the most challenging concepts covered in
class. They are meant to make it easier for you to follow class. They are also useful to
prepare for class and to study the m

H26
Numerical Example of Arbitrage When Calls
Violate the Minimum Value Bound Prior to
Expiration
Foundations of Finance
Prof. Alexi Savov
1. Prior to expiration, the minimum value is
C max 0, S Xert .
(1)
2. Suppose S = $101, X = $100, r = 6%, t = 1 ye

Geometric Average Versus Arithmetic Average
W. L. Silber The Question Suppose you invest $435 in a zero coupon bond for one year and earn a return of 8%. You then reinvest the proceeds at 12% for a second year. How do you describe your average annual retu