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UGBA 103
Midterm Exam 02
The answers on this midterm are entirely my own
work. I neither gave nor received any aid while
taking this midterm.
_
Signature
Any midterm that is turned in without a signature indicating
that you have taken th

Part1:MultipleChoice
Instructions: 1. What is the effective annual rate on a loan if you are quoted a 12% APR (with monthly compounding)? a. 12% b. 11.935% c. 1% d. 0.83% e. 12.6825% 2. You know the following rates: r1 5% and f 2 7% . What is the twoyear

UGBA 103
Midterm Solutions
2009-10-16
Multiple choice questions: 1. E 2. E 3. A 4. D 5. C 6. E 7. B 8. D Long questions: 1. We are given that IRRA = 12.61% and N P VA = 12, 030, and need to say something (if we can) about N P VB and IRRB . Let C1 , . . .

HelpfulFormulas Inflationformula:
rreal rnominal i 1 i
Pricetoearningsratio
P0 P0 1 EPS r P0 PVGO
Navediversificationformula:
Var Portfolio 1 1 Avg .Var 1 Avg .Cov where Avg .Var n n
Var
1
n
i
T
Miles/EzzellFormulaforWACC 1 rA D WACC r A TC rD DE 1 rD

Today's L ectur e
Financial Markets Borrowing and Lending Net Present Value Administration
Select class rep Waiting List questions
Barbara Felkins felkins@haas Business majors can call her or drop in 92
1
What i s Fi nance?
The process by which marke

Today's L ectur e
Revi ew of NPV Ri sk Ti me Val ue of M oney
L ets summar i ze
I have convinced you (I hope) that any investment that has positive NPV is a "no brainer" preferences do not affect this statement it's like you just get the NPV Next we need

Exercise for Excel
•
•
•
•
•
Expected Return Stock 1 = 7%
Expected Return Stock 2 = 5%
Volatility Stock 1 = 30%
Volatility Stock 2 = 20%
Correlation = 0
How is the expected return and standard deviation of the portfolio affected if we vary the
port

New York Times
September 25, 2005
Deal Is Reached to Drop Debt of 18 Poor Nations
By EDMUND L. ANDREWS
WASHINGTON, Sept. 24 - Finance ministers from around the world reached agreement
on Saturday on a plan to wipe out as much as $55 billion in debt owed b

Mini Case: Saving for College
Your life is changing rapidly. You are still in your first semester at Haas, and you have met some
very nice people. But there are big changes on the horizon – your significant other is pregnant and
the baby is due around the

UGBA 103
Case author: Marcus M. Opp
Case Study: How to make money without charging “Fees” !
Mr. M. M. O. wants to transfer EUR 15,000 from Europe to his USD account at
Citibank. He calls his local European bank and finds out that there are two options

“Car Loan” case
Discussion Questions
1) What do you think of Prof. Keppel's calculations? Are they right? What should one
conclude from them?
2) What do you think of “Sperling’s rule” [that it’s a good idea to borrow if you can earn
an interest rate equal

Introduction
This Solutions Handbook has been designed to supplement the HP-12C
Owner's Handbook by providing a variety of applications in the financial
area. Programs and/or step-by-step keystroke procedures with
corresponding examples in each specific

1) The expected return on equity is 10%. The expected return on debt is 5%. The marginal tax rate is25%.Thedebtequityratiois1.WhatistheWACC?
2) There are two investors and two firms in the market. Firm A has 100 shares outstanding, Firm B has 200 shares o

TI-86 Financial Functions
Loading and Installing Finance Features on Your TI-86 . 2
Loading the Finance Features into TI-86 Memory . 2 Installing the Finance Features for Use. 2 Displaying the FIN (Finance) Menu. 3 The FIN Menu . 3 Uninstalling the Financ

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Annuities and Perpetuities:
The goal of these notes is to derive all perpetuity and annuity formulas. It turns
out that we only need to know one calculus formula:
T
X
xj
1
=
j=1
1 xT
1 x
(1)
The proof of this calculus formula is at the end of this docum

1
Answers to Quiz 02
1) q stands for quarterly and s for semiannually. It must be true that the
e¤ective annual rate must be equal for both APRs (with di¤erent compounding
frequencies), i.e.:
1+
2
AP Rs
2
=
1+
AP Rq
4
4
Hence we get:
AP Rq = 4
!
2
4
AP Rs

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SID #: _
Quiz II: Bonds and Loans
UGBA 103
Section Number _
1. A one year zero coupon bond is selling for $93.00 A two year zero coupon bond is selling for
$81.00 (both bonds have face value $100). What is the price of a two year, 6% coupon bond
(

Name: _
SID #: _
Quiz VI: CAPM
UGBA 103
Section Number _
1. The stock of Apple has a correlation coefficient of 0.3 with the market. The volatility of Apple
is 50% and the volatility of the market is 20%. Suppose the risk free rate is 5% and that a
portfo

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luiz V: Statistics
UGBA
103
The table below lists the possible fioint) realizations of stock X,Y and the risk-free security
as the associated probabilities:
as
well
Probability
Return on Security X
Return on Securitv
U3
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0
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It6
l13
0%
3%
- r.5%

UGBA 103
Midterm 2 Solutions
2008-10-29
1. Without the value from growth opportunities, the price would be negative. So
we can say that PVGO > 8.
2. (a) Note that we could do this on a per-share basis or in terms of the total value
of the ﬁrm. I’ll do the

Name: _
SID #: _
Quiz IV: Investment
UGBA 103
Section Number _
1. Company Y is expected to pay an end-of year dividend of $5 a share. After the dividend its
stock price is expected to sell at $110. If the market capitalization rate is 8%, what is the
curr

Solution to bonus quiz 2
December 8, 2008
Our ﬁrst task is to calculate stock returns and market returns based on the raw
data we received in the spreadsheet. Here, the important thing is to make sure that
stock return and risk-free return (already calcul