Finance
Fall 2012
Professor Admati
Problem Set #4
1. Brenda Weiss is a portfolio manager managing a portfolio worth $2,000,000. She typically
constructs her portfolio using an S&P fund and a fund that invests in small stocks, as well as
treasury bills. He
Finance I
Fall 2012
Professor Admati
Solutions to Problem Set #4
1. The weights in Brenda's portfolio are -500,000/2,000,000 = -0.25 in the riskless asset,
1,000,000/2,000,000 = 0.5 in the S&P fund and the rest, i.e., 1,500,000/2,000,000 = 0.75 in
the sma
Finance I
Fall 2009
Professor Admati
Solutions to Problem Set #3
1. We have to project earnings under the assumptions to see what they will be in seven
years. Given the assumptions about earnings and their growth, projections for the next
seven years are
Finance
Fall 2012
Professor Admati
Problem Set #5
1. The Stanford Furniture Company has successfully been in business for 25 years and
grown to have annual sales of $420 million and annual profits of $37 million. Currently
its capital structure is such th
Finance
Fall 2009
Professor Admati
Problem Set #3
Due: Thursday, October 15, 2008
1. Spanweb (not a real company) is an internet company whose stock is publicly traded.
While the company has not made profits yet, its business seems robust and analysts pre
Finance
Winter 2012
Professor Admati
Problem Set #2
Due: Friday, January 27, 2012
1. The Quinby Corporation is a Canadian manufacturing company that is negotiating the
sale of a large printing press to a French company. The sale will actually take place i
Finance
Session 13:
Options and Derivatives:
An Introduction
November 8, 2013
Professor Ishii
Outline
Class Assignment (Marriott)
Options: what are they?
Calls
Puts
Risk management and options
Put/Call Parity
1
Derivatives and Especially Options are
Finance
Session 18
Applications of Derivatives to
Corporate Finance III:
Convertible Bonds and Other Option
Features in Financial Securities
December 4, 2013
Professor Ishii
Outline
More on Equity as a Call
C
Convertible Bonds
tibl B d
Payoffs
Digamem
Finance
Session 17
S
i
Applications of Derivatives
to Corporate Finance II:
Employee Stock Options,
Options
Options in Capital Structure
November 22, 2013
Professor Ishii
$0 or $872,000,000?
In 2000 Steve Jobs (CEO Apple Computer) was awarded an atthe-mo
Finance
Session 15:
Pricing Derivative
Securities II:
Black-Scholes Formula;
Risk and Return of Options
November 15, 2013
Professor Ishii
Outline
Class Assignment
The Black/Scholes Equation for Pricing
Options
Video
Comparative Statics
Risk and retur
Finance
Session 19:
Summary: Valuation in an
Initial Public Offering (IPO)
December 6, 2013
Professor Ishii
OUTLINE
Class Assignment
IPOs
Costs and benefits
Process
Empirical evidence
Short run performance of companies
having IPOs
Long run performa
F221
Review Session 3
Fall 2012
TAs : Yizhou Xiao, Matt Haney, Mike Schwert
Email: [email protected]
Duration
PT
tCt
t=1 (1+rt )t
Ct
t=1 (1+rt )t
Duration = PT
=
T
X P V (Ct )
t
T otalP V
t=1
The value of any portfolio of bonds with duration D will
Finance
Winter 2012
Professor Admati
Solutions to Problem Set #2
1. Lets quote the exchange rates, both spot and forward, according to the number of units of
Euros per Canadian dollar. Let F denote the 9-month forward exchange rate. If the price for
the p
F221
Review Session 2
Fall 2012
TAs: Matt Haney, Mike Schwert, Yizhou Xiao
Email: [email protected]
P1 (Exam 2009) You were asked by your boss to evaluate a real estate opportunity. The
opportunity involves the development of a product in your fir
Finance
Fall 2012
Professor Admati
Solutions to Problem Set #5
1. (a) Since there are no taxes, according to Modigliani and Millers results, the unlevered
beta (i.e., the beta of the firms equity if the firm were an all-equity firm) is equal to the
weight
Finance
Session 9:
More on Market Efficiency and
the Determinants of Stock
Returns
October 23, 2013
Professor Ishii
Outline
Liz Claiborne
Segmented Markets
The CAPM and Anomalies
Market Efficiency and Competitive Markets
How does information get into pri
Finance
Session 14:
Pricing Derivative
Securities I
November 13, 2013
Professor Ishii
Outline
Review
Class assignment
Put-Call Parity and Forward
Contracts
Early Exercise
Binomial model: Pricing Options
using dynamic trading strategies
1
Put-Call Par
Finance
Session 16:
Applications of Derivatives to
Corporate Finance I:
Real Options
p
November 20, 2013
Professor Ishii
Outline
Class assignment
Real Options
1
Recall Example from Q3, Problem Set #2
GSB Industries produces widgets.
For $160m a new mac
Econ 135/MS&E 245G
Finance for Non-MBAs
Practice Mid-Term Exam #1
One Hour and Fifteen Minutes.
This exam has four questions.
The number of points for each question is given in parenthesis.
Answer as many questions as you can.
Make sure to include all the
The Time Value of
Money
Present value of a stream of CF
0
1
2
3
T
4
.
PV
C1
C2
C3
C4
CT
Annuities and perpetuities
0
PV
0
1
2
3
.
C
C(1+g)
C(1+g)2
1
2
T
.
PV
C
C(1+g)
C(1+g)T-1
Annuities and perpetuities
0
PV
0
1
2
3
.
C
C(1+g)
C(1+g)2
1
2
T
.
PV
C
C(1+g)
Econ 135/MS&E 245G
Finance for Non-MBAs
Solutions to Practice Final Exam #1
2 Hours and 15 Minutes
This exam has twelve questions: four true/false questions, four
multiple-choice questions, and four full-length problems.
The number of points for each ques
Econ 135/MS&E 245G
Finance for Non-MBAs
Practice Final Exam #2
2 Hours and 15 Minutes
This exam has twelve questions: four true/false questions, four
multiple-choice questions, and four full-length problems.
The number of points for each question is given
Econ 135/MS&E 245G
Finance for Non-MBAs
Practice Final Exam #1
2 Hours and 15 Minutes
This exam has twelve questions: four true/false questions, four
multiple-choice questions, and four full-length problems.
The number of points for each question is given
Finance
Session 5:
Valuing A Companys Stock:
The Case of Interco
October 9, 2013
Professor Ishii
A Model for Price Earnings Ratios
Assume that
1. earnings are expected to grow at a constant rate of g
(starting at E0 in year 0)
2. a constant fraction a of
Finance
Session 1:
Introduction
September 25, 2013
Professor Ishii
Outline
Stock Prices and Value
Valuation and Financial Decision Making
What Good are Financial Markets?
Valuation Axioms
Arbitrage
We come back to all these repeatedly in
the course.
1
St
Finance
Session 7:
Market Pricing of
Risky Securities
October 16, 2013
Professor Ishii
Agenda
Class Assignment
International Diversification
Example
Add a riskless security
Optimality Condition
Supply Equals Demand:
pp y q
The Capital Asset Pricing M
Finance
Session 3
Corporate Investment Decisions;
Bond Values and
Changing Interest Rates
g g
October 2, 2013
Professor Ishii
Argentum Partners
Net Present Value Analysis
Year
Purchase
Price
-9.8000
9 8000
0
Contri
butions
to NPV
-9.8000
9 8000
Discount D
Finance
Session 4:
Market Efficiency and the
Valuation of Stocks
October 4, 2013
Professor Ishii
Is this a Bubble?
1600
Value of Market Index
x
1500
1400
1300
1200
1100
Start of
"Bubble"
1000
900
0.00
1.00
2.00
3.00
4.00
5.00
Year
1
Mystery Index is S&P50