BUS 365: Investments
Solution to Practice Problems
Financial Statement Analysis
1) BRIEFLY explain why the change in Net Working Capital is subtracted in the free cash flow
calculation.
Answer: The FC
BUS 365: Investments
Solution to Practice Problems
Derivatives
1) Consider the oil market. Suppose that a call option on oil has a strike price of $27.50 and sells
for $2.20. A put option with the sam
BUS 365: Investments
Solution to Practice Problems
Stocks
1) You wish to evaluate Diamond Offshore Drilling using the Comps valuation technique.
Information about Diamond and some of its competitors a
BUS 365: Investments
Solution to Practice Problems
Bonds
1) You wish to invest $20,000 today into a portfolio of two U.S. Treasury bonds. In 5 years, you
will liquidate that portfolio and use the fund
BUS 365: Investments
Solution to Practice Problems
Risk and Return
1) For this question, please assume that markets are efficient. BRIEFLY answer the following.
Suppose that a risk-averse investor wan
BUS 365: Investments
Solution to Practice Problems
Time Value of Money
1) You recently inherited $50,000 and plan to invest that money at 10% interest. You also plan
to save $5,000 per year for each o