Chapter 4: Analysis of Financial Statements
To keep this chapter from involving too much memorization, we provide our students with a formula sheet for
use on exams. That makes a few of the questions trivially easy, but most require some thought, and some
Chapter 3: Financial Statements, Cash Flow, and Taxes
This chapter has a lot of definitions. They are important, but we dont like to make students memorize too
many of them early in the course. We let our students use a formula sheet that includes the key
EXAM 2 REVIEW Chapters 4-7
1. Know why information systems raise new ethical questions
2. Know the moral dimensions of the information age
3. Know key technology trends that raise ethical issues are
4. Know what nonobvious relationship awareness is
5. Kno
Chapter 11&12
1. The reward-to-systematic risk (beta) ratio is 7.7% and the risk-free rate is
4.2%. What is the expected return on a risky asset if the beta of that asset is .
89?
Reward-to-risk ratio: [E(r)rf] /
[E(r) 0.042] / 0.89 = 0.077
E(r) = 11.05
Chapter 9
Interest Rates
9-1
Overview
1. Rates and prices on money market instruments.
2. Rates and yields on fixed-income securities.
3. The term structure of interest rates.
4. Theories of the term structure
9-2
Money Market Instruments
Money market in
Chapter 11 Diversification and Risky
Asset Allocation
Overview
How to calculate expected returns and variances for a
security.
How to calculate expected returns and variances
portfolio.
The importance of portfolio diversification.
The efficient fronti
Chapter 12
Return, Risk and the Security Market Line
Overview
The
difference between expected and unexpected returns.
The difference between systematic risk and unsystematic risk.
Systematic risk and beta.
The security market line and the capital asse
Chapter 10
Bond Prices and Yields
Overview
How to calculate bond prices and yields.
The importance of yield to maturity.
Interest rate risk and duration.
Bond Basics
A Straight bond is an IOU that obligates the issuer of
the bond to pay the holder of t
CLOSER LOOK SERIES: TOPICS, ISSUES, AND CONTROVERSIES IN CORPORATE GOVERNANCE
CGRP-11
DATE: 10/11/10
PLEDGE (AND HEDGE) ALLEGIANCE TO THE COMPANY
EXECUTIVE PLEDGING AND HEDGING
A significant portion of executive compensation is paid in the form of equity.
MULTIPLE-CHOICE QUESTIONS
NB: Mark your answers on the computerised sheet provided
1. The three-month interest rates in Switzerland and the United States are 9% and 3% per
annum respectively, with continuous compounding. The spot price of the Swiss franc
1. Which of the following is not true
(a) When a CBOE option on IBM is exercised, IBM issues more stock
(b) An American option can be exercised at any time during its life
(c) An call option will always be exercised at maturity if the underlying asset pri
A p T E R Introduction
In the last 30 years, derivatives have become increasingly important in nance. Futures
and options are actively traded on many exchanges throughout the world. Many
different types of forward contracts, swaps, options, and other deri
download full file at http:/testbankinstant.com
Test Bank: Chapter 1
Introduction
1. List three types of traders in futures, forward, and options markets
i.
_
ii.
_
iii.
_
2. Which of the following is not true (circle one)
a. When a CBOE call option on IB
Value at Risk Project
This project focuses on the use of the Exponentially Weighted Moving Average method to estimate
the current volatility of a portfolio. In addition, portfolio rebalancing is applied.
The student will use daily data for the EWMA estima
Value at Risk Project
This project is designed to highlight the calculation of value at risk, VAR. The calculation is based
on the portfolio that was created by each student. The analysis is an extension of the portfolio evaluation
excel spread sheet. The
Formula Sheet
0 The Black-Scholes formuia
C = So N(dl)mKe"TN(d2)
P =K3' N(_d2)_So N(_d1)
2
ln(S /K)+(r+c3r f2)?"
where d =~-mqw-m
1 03/2"
2
1n(S lK)+(r0 /2)T
d ='"*"-9"-md _0-JT
2 O cfw_T l
o The delta of a European cali on a non-dividendpaying stock
Dena
Portfolio Evaluation Project
The formation of the Sharpe Optimal and minimum variance portfolios was based on historic data.
However, past performance is not indicative of future performance. A portfolio of 5 stocks with 1 included
ETFs has much lower div
Optimal Portfolio Project:
The goal of this project is to familiarize students with the risk management that comes from
diversification. The student must generate two portfolios, the first is a Sharpe Optimal Portfolio and the
second is a minimum variance
CHAPTER 20
Value at Risk
Practice Questions
Problem 20.8.
A company uses an EWMA model for forecasting volatility. It decides to change the
parameter from 0.95 to 0.85. Explain the likely impact on the forecasts.
Reducing from 0.95 to 0.85 means that more
Futures Options
Chapter 16
Fundamentals of Futures and Options Markets, 8th Ed, Ch 16, Copyright John C. Hull 2013
1
Options on Futures
Referred
to by the maturity month of the
underlying futures
The option is American and usually
expires on or a few da
The Greek Letters
Chapter 17
Fundamentals of Futures and Options Markets, 8th Ed, Ch 17, Copyright John C. Hull 2013
1
Example (Page 365)
A bank has sold for $300,000 a European call
option on 100,000 shares of a non-dividendpaying stock
S0 = 49, K = 50,
Trading Strategies
Involving Options
Chapter 11
Fundamentals of Futures and Options Markets, 8th Ed, Ch 11, Copyright John C. Hull 2013
1
Strategies to be Considered
Stock
plus option
Two or more options of the same type
(a spread)
Two or more options
Value at Risk
Chapter 20
Fundamentals of Futures and Options Markets, 8th Ed, Ch 20, Copyright John C. Hull 2013
1
The Question Being Asked in VaR
What loss level is such that we are X%
confident it will not be exceeded in N
business days?
Fundamentals of
Mechanics of Futures
Markets
Chapter 2
Fundamentals of Futures and Options Markets, 8th Ed, Ch 2, Copyright John C. Hull 2013
1
Futures Contracts
Available
on a wide range of underlyings
Exchange traded
Specifications need to be defined:
What can be de
CHAPTER 17
The Greek Letters
Practice Questions
Problem 17.8.
What does it mean to assert that the theta of an option position is 0.1 when time is measured
in years? If a trader feels that neither a stock price nor its implied volatility will change,
what
CHAPTER 6
Interest Rate Futures
Practice Questions
Problem 6.8.
The price of a 90-day Treasury bill is quoted as 10.00. What continuously compounded
return (on an actual/365 basis) does an investor earn on the Treasury bill for the 90-day
period?
The cash
CHAPTER 20
Value at Risk
Practice Questions
Problem 20.8.
A company uses an EWMA model for forecasting volatility. It decides to change the
parameter from 0.95 to 0.85. Explain the likely impact on the forecasts.
2
Reducing from 0.95 to 0.85 means that mo
Chapter 6
An ordinary annuity is best defined by which of the following?
Equal payments paid at the end of regular intervals over a stated time period.
Which one of the following accurately defines a perpetuity?
Unending equal payments paid at equal time
1
2
3
4
A
B
04 Chapter model
C
D
E
F
G
H
I
9/22/15
Chapter 4. Analysis of Financial Statements
5
6
This spreadsheet model sets up common size balance sheets and income statements for Allied (2015 and
2016 statements) and conducts a full ratio analysis of
10 Case model
4/2/2017 19:34
10/1/2015
Chapter 10. The Cost of Capital
This spreadsheet model is designed to be used in conjunction with the chapter's integrated case and
the related PowerPoint slide presentation.
PART B
What is the market interest rate o