Marty Fornear
Homework #3
1. Simple interest is money earned on the original principle total invested. Compounding interest is
both initial principal and interest reinvested from prior periods. They differ by simple interest
only earning each period only
Marty Fornear
Homework 4
1. The two assumptions of dividend growth model are the dividend per share will grow at a
constant rate and the expected dividend growth rate should be less than the cost of equity.
2. 10%=2.5875/.0650=$39.81 6%= 2.5875/.0250=$103
Marty Fornear
HW #8
1. Arithmetic return is the return that is made in an average year over a period. Geometric return is
the average compound return made per year.
2. Risk premium is the surplus return required from an investment in a risky asset over th
Marty Fornear
FIN HW 10
1. The two approaches to cost of capital are the dividend growth model approach and the security
market line approach.
2. 9. A) .65(.08)+.65(.02)+.65(.23)=.2145/ 21.45% B).2(.08)+.2(.02)+.6(.23)=.158 /15.8%
10. Boom = .30(.35) + .4
Marty Fornear
Finance HW 9
1. Systematic risk is the day to day fluctuations in a stock's price and unsystematic risk is the type of
uncertainty that comes with the company you invest in. One example of systematic risk is the
Great Recession.
2. 11.3 a. u
Hannah Moore
William Prat
Finance 370
25 January 2016
Homework 1
1.What is an agency problem? Who is an agent? And who is the principal?
An agent is a person who acts for the principal. An agent is someone like a manager because they are
hired to act on s
Joshua Garrett
Finance 370 (Mon. Wed.)
Homework #1
1. The four basic areas of finance are corporate finance, Investments, Financial institutions,
and International finance. Corporate finance can also be called business finance. When
dealing with business
Joshua Garrett
Homework #6
1. NPV stands for Net Present Value. It is the difference between the market value and its
cost. You calculate NPV by taking the present value of the future cash flow and
subtracting the cost. IRR stands for Internal Rate of Ret
Joshua Garrett
Homework #3
1. Simple interest is what is earned each period but only on the original principle amount
invested. Since simple interest does not get reinvested, this causes your interest to remain
the same throughout your investment. Compoun
Joshua Garrett
Homework #2
1. Financial ratios are beneficial because we can see the different methods and invest unlike
pieces of financial information. Also, another benefit is that it can help set up future goals
and targets. Some drawbacks using finan
Joshua Garrett
Homework #7
1. Opportunity cost is the most valuable alternative that is given up if a particular
investment is untaken.
Sunk cost a cost that has already been incurred and cannot be recoupled and therefore
should not be considered I an inv
Joshua Garrett
Homework #8
1. Arithmetic and geometric returns differ because an arithmetic return can be both positive
and negative. Geometric returns are always positive and can never be negative. When you
want to convert from a geometric return to an a
Joshua Garrett
Homework #12
Chapter 14:
14.1) Dividend policy is related with timing of dividend payments and not on the amounts paid.
Dividend policy is irrelevant when there are no imperfections because shareholders can change
the firms dividend strateg
Joshua Garrett
Homework #11
The four types of bankruptcy are complete business failure, legal bankruptcy, technical
insolvency, and accounting insolvency. Complete business failure is when a business activity
results in a loss to its creditors. Legal bank
Joshua Garrett
Homework #10
1. The two approaches to cost capital are the pure play approach and the subjective
approach. The pure play is the use of the WCC that is unique to a particular project based
on companies in a similar line of business. The subj
Joshua Garret
Homework #9
1. Systematic and unsystematic risk deals with the number of assets that you have invested
in companies. Systematic risk can be described as a large number of assets that are
influenced which is also known as market risk. Unsyste