Homework Solutions
CHAPTER 3
Hedging Strategies Using Futures
Problem 3.6.
Suppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65,
the standard deviation of quarterly changes in a futures price on the commodity is $
Solutions to Homework Problems Chapter 1 and 2
Chapter 1
Problem 1.5.
An investor enters into a short forward contract to sell 100,000 British pounds for US dollars at an
exchange rate of 1.5000 US dollars per pound. How much does the investor gain or los
SOLUTIONS TO HOMEWORK CHAPTER 4
Problem 4.3.
The six-month and one-year zero rates are both 10% per annum. For a bond that has a life of 18 months
and pays a coupon of 8% per annum (with semiannual payments and one having just been made), the
yield is 10.
Homework Solutions
CHAPTER 5
Determination of Forward and Futures Prices
Problem 5.3.
Suppose that you enter into a six-month forward contract on a non-dividend-paying stock when the stock
price is $30 and the risk-free interest rate (with continuous comp
1
BUS 538
Khan
VALUATION- a quick Review
A value of a business is influenced by a host of factors, which are both qualitative and
quantitative. An entrepreneur must take into consideration all these factors before
determining the value of his/her venture.
BUS 538
Khan
ALTMAN Z
One of the ways to predict corporate failure is to use Altmans Z given
as
Z = 1.2X1 + 1.4X2 + 3.3X3 + .6X4 + 1.0X5
X1 = Working Capital / Total Assets x 1.2
X2 = Retained earnings / Total Assets x 1.4
X3 = EBIT/Total assets x 3.3
X4
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Cost Accounting, 15e (Horngren/Datar/Rajan)
Chapter 2 An Introduction to Cost Terms and Purposes
Objective 2.1
1) An actual cost is _.
A) is the cost incurred
B) is a predicted or forecasted cost
C) is anything
Derivatives
FIN 532
Week 4
Determination of Forward and Futures
Prices
Prof. Wassim Abourjeili
Consumption vs Investment Assets
Investment assets are assets held by
significant numbers of people purely for
investment purposes (Examples: gold, silver)
Co
Derivatives
FIN 532
Week 1
Mechanics of Futures Market
Prof. Wassim Abourjeili
What is a Derivative?
A derivative is an instrument whose value depends on, or is derived
from, the value of another asset or underlying asset
The underlying asset trades in a
Derivatives
FIN 532
Week 2
Hedging Strategies Using Futures
Prof. Wassim Abourjeili
Hedges
A long futures hedge (buy futures contract) is appropriate when you know you
will purchase an asset in the future and want to lock in the price
A copper fabricato
Chapter 6-Process Costing
51. What system would a manufacturer of unique special orders or batch processes most likely use to
accumulate costs?
A. contract costing
B. variable costing
C. process costing
D. job-order costing
52. In process costing, costs a
1. An accounting information system collects, records, summarizes, analyzes, and manages
data to transform inputs into information that is provided to users.
ANSWER: True
1. An integrated cost management system receives information from and provides
infor
1. The
information system is primarily concerned with producing outputs for
internal users using inputs and processes needed to satisfy management objectives.
ANSWER: cost management
2. The cost management subsystem designed to assign costs to individual
Derivatives
FIN 532
Binomial Trees
Week 7
Professor Wassim Abourjeili
Option Payoff Values
The easiest way to determine an options value is at expiration. At that point, there
is no future. Only the present matters. An options value at expiration is calle
Derivatives
FIN 532
Week 6
Trading Strategies Involving Options
Prof. Wassim Abourjeili
Position in an Option and the Underlying
Profit
K
ST
(a)
Writing a Covered Call
Long position in a stock combined
with a short position in a call
The long stock posi
Derivatives
FIN 532
Week 3
Interest Rates
Prof. Wassim Abourjeili
Types of Interest Rates
Treasury Rate on instrument issued by a government in its own currency
LIBOR is the rate of interest at which a AA bank can borrow money on an unsecured
basis from
HOMEWORK SOLUTION TO CHATERS 10 and 11
Problem 10.23.
Calculate the intrinsic value and time value from the mid-market (average of bid and
offer) prices the September 2013 call options in Table 1.2. Do the same for the September 2013 put
options in Table
Derivatives
FIN 532
Week 4
Mechanics of Options Market and
Properties of Stock Options
Prof. Wassim Abourjeili
Options
An option is a contract which gives its holder the right, but not the
obligation, to buy (or sell) an asset at some predetermined price
Cost Accounting, 14e (Horngren/Datar/Rajan)
Chapter 5 Activity-Based Costing and Activity-Based Management
Objective 5.1
1) If products are different, then for costing purposes:
A) an ABC costing system will yield more accurate cost numbers
B) a simple co
Cost Accounting, 14e (Horngren/Datar/Rajan)
Chapter 4 Job Costing
Objective 4.1
1) Job costing information is used:
A) to develop strategies
B) to make pricing decisions
C) for external financial reporting
D) All of these answers are correct.
Answer: D
2)
Chapter 04 - Process Costing and Hybrid Product-Costing Systems
Chapter 04 Process Costing and Hybrid Product-Costing Systems Answer Key
True / False Questions
1. The flow of costs through the manufacturing accounts is essentially the same in both
process
FIN 3023, Homework assigned from the class example
1. A Spanish bond with 2 years left to maturity date pays 15% annual coupon and has a par value =
$1000. The probability of default in the 1st year = 10%. There is 1/3 chance the bond will default in
year
FIN 3023 Exam 1 review: What weve learned in the first 5 chapters and why?
Big picture goals:
Understanding Financial markets and Institutions
o Why are they important? (chapter 1 & 2)
o Financial institutions are like any other business in that they want
Suggested answers to HW questions from Ch. 19
19-1
First issue: 20-year straight bonds with an 8% coupon.
Second issue: 20-year bonds with 6% annual coupon with warrants. Both bonds
issued at par $1,000. Value of warrants = ?
First issue: N = 20; PV = -10