Econ 422
Summer 2012
Problem Set 1
Solutions
1.
Let x = the amount that Casper should invest now. Then ($200,000 x) is the amount he
will consume now, and (1.08 x) is the amount he will consume next year. Since Casper
wants to consume exactly the same amo
Econ 422
Summer 2010
PROBLEM SET 1
Due Monday 7/26/10
Note: The tools needed for the following problems are given in lectures and in the
Hirshleifer and Varian reading. The main text does not cover them adequately (its an
MBA textbook and not an econ text
Econ 422 -
Summer 2012
PROBLEM SET 1
Due Thursday, 07/05/12
Note: The tools needed for the following problems are given in lectures and in the
Hirshleifer and Varian reading. The main text does not cover them
Valuation of Securities: Stocks
Econ 422: Investment, Capital & Finance University of Washington Eric Zivot Fall 2007 January 31, 2007
E. Zivot 2006 R.W. Parks/L.F. Davis 2004
Features of Common Stock
Voting rights (Cumulative vs. Straight) Proxy voting
Econ 422
Summer 2014
Problem Set 3
Due Tuesday 07/22/14
1. Upon retirement, a university professor finds that he has $1 million in his retirement
account at TIAA-CREF. He wants to continue receiving a monthly salary for the next 20
years, so he decides to
BRANDEIS UNIVERSITY
Fin 213a Advanced Financial Accounting
2009
First Examination
Any violations of academic honesty will result in a grade of 0 for this exam. This
examination consists of 20 multiple choice questions and 4 problems.
Allocate your time ca
Econ 422
Summer 2014
Problem Set 5 Solutions
PCBR Chapter 8 (Capital Markets and the Pricing of Risk) pages 280 284
Problems 6, 9, 14, 20, 24, 33
10-6.
Using the data in the following table, calculate the return for investing in Boeing stock from
January
BRANDEIS UNIVERSITY
Fin 213a Advanced Financial Accounting
2009
First Examination
Any violations of academic honesty will result in a grade of 0 for this exam. This
examination consists of 20 multiple choice questions and 4 problems.
Allocate your time ca
Econ 422
Summer 2014
HW 1
Due Thursday 07/03/14
1. Casper Milktoast has $200,000 available to support consumption in periods 0 (now)
and 1 (next year). He wants to consume exactly the same amount in each period. The
interest rate is 8 percent. There is no
Econ 422
Summer 2012
Problem Set 2 Solutions
1. Suppose you have $10,000 to invest today in a money market account that pays
an annual interest rate of r. How many years will it take for your money to double
Econ 422 -
Summer 2012
PROBLEM SET 4
1. Investment Decisions Comparing Equivalent Annual Costs
A. The Sea Star Company has to choose between two machines which do the same job
but have different lives:
Econ 422 -
Summer 2012
Risk-
Return Question
PROBLEM SET 5
1. The probability distribution for next years price of Google stock is given by
Price P1
$300
$400
$500
$600
Probability
0.1
0.2
0.5
0.2
a. Compute the
Econ 422
Fall 2013
HW 3 Answer Key
1. Upon retirement, a university professor finds that he has $1 million in his retirement
account at TIAA-CREF. He wants to continue receiving a monthly salary for the next 20
years, so he decides to purchase an annuity
Econ 422 -
Summer 2012
PROBLEM SET 7
PCBR Chapter 11 (Financial Options) pages 401-405
Problems 3, 5, 6, 7, 8, 9, 12, 13, 15, 17, 20, 28
20-3.
Below is an option quote on IBM from the CBOE Web site.
a.
Which option contract had the most t
Econ 422 -
Summer 2012
PROBLEM SET 6
PCBR Chapter 9 (Optimal Portfolio Choice and the Capital Asset Pricing Model)
pages 325-331
Problems 20, 21, 25, 26, 33, 34, 35, 37, 44, 46, 47
11-20.
Suppose Ford Motor stock has an expected return of
Econ 422 -
Summer 2012
PROBLEM SET 3
PCBR (Interest Rates) pages 102 106 Problems 25, 27, 29 -
32
5-25.
In 1975, interest rates were 7.85% and the rate of inflation was 12.3% in the United States.
What was the
Econ 422
Summer 2014
Due on 08/05/2014
HW 4
Hand in the following textbook problems.
1) PCBR (Valuing Stocks) pages 239-243
Problems 1-4, 6, 8
9-1.
Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in one year, and its
equity cost o
Econ 422
Summer 2014
HW 4 - Solutions
PCBR (Valuing Stocks) pages 239-243
Problems 1-4, 6, 8, 21
9-1.
Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in one year, and its
equity cost of capital is 15%. What price must you expect i
Econ 422
Summer 2014
Problem Set 2
Due Thursday 07/15/14
Make sure that you can do PCBR Chapter 2 (Time Value of Money) problems with ease.
Hand in the following problems (it looks like a lot of problems but they are mostly pretty
short):
1. Suppose Tom J
Econ 422
Summer 2014
Problem Set 1
Solutions
1.
Let x = the amount that Casper should invest now. Then ($200,000 x) is the amount he
will consume now, and (1.08 x) is the amount he will consume next year. Since Casper
wants to consume exactly the same amo
Econ 422
Fall 2014
Problem Set 1 Answer Key
1.
Let x = the amount that Casper should invest now. Then ($200,000 x) is the amount he
will consume now, and (1.08 x) is the amount he will consume next year. Since Casper
wants to consume exactly the same amou
Econ 422
Summer 2014
Problem Set 2
2. Suppose Tom Jones lives in a one-good (say corn), two-period world. Tom's
preferences for current and future consumption can be represented by a utility function of
the form
U= log(C0) + (2/3)log(C1)
where C0 and C1 a
E CON 422A: F INANCE AND I NVESTMENTS
L ECTURE 3: N O -A RBITRAGE
Mu-Jeung Yang
Winter 2016
c
2016
Mu-Jeung Yang
O UTLINE FOR T ODAY
I)
II )
(Pure) Arbitrage: three perspectives
Statistics: Random Variables, Expectations, the Law of Large Numbers
III )
Ex
E CON 422A: F INANCE AND I NVESTMENTS
L ECTURE 2: P RESENT VALUE
Mu-Jeung Yang
University of Washington, Seattle
Winter 2016
c
2016
Mu-Jeung Yang
O UTLINE FOR T ODAY
I)
II )
Reward for Waiting = return!
Net Present Value (NPV) with multiple periods
III )
E CON 422A: F INANCE AND I NVESTMENTS
L ECTURE 1: I NTRODUCTION
Mu-Jeung Yang
University of Washington, Seattle
Winter 2016
c
2016
Mu-Jeung Yang
O UTLINE FOR T ODAY
1. Class logistics (see syllabus)
2. What this class is about
3. Six examples of what the
7
Global Markets in
Action
CHAPTER
Learning Objectives
Explain how markets work with
international trade
Identify the gains from international trade
and its winners and losers
Explain the effects of international trade
barriers
Explain and evaluate ar
Econ 422
Summer 2014
Problem Set 5
Due Monday 08/12/14
PCBR Chapter 8 (Capital Markets and the Pricing of Risk) pages 280 284
Problems 6, 9, 14, 20, 24, 33
PCBR Chapter 9 (Optimal Portfolio Choice and the Capital Asset Pricing Model) pages
325-331
Problem
Econ 422
Summer 2014
Problem Set 6
This problem set focuses on portfolio theory.
PCBR Chapter 9 (Optimal Portfolio Choice and the Capital Asset Pricing Model) pages
325-331
Problems 14, 15, 17, 20, 21, 25 (see the example Excel spreadsheet Portfolio ), 26
Econ 422
Summer 2014
Problem Set 6 Solutions
This problem set focuses on portfolio theory.
PCBR Chapter 9 (Optimal Portfolio Choice and the Capital Asset Pricing Model) pages
325-331
Problems 14, 15, 17, 20, 21, 25 (see the example spreadsheet Econ422Port
An asset generates a cash flow that is
$1 next year, but is expected to
grow at 5% per year indefinitely.
PV finite growing annuity
PV1 = C/(r-g) [1- [(1+g)/(1+r)]^T]
PV of infinite growing annuity
PV2 = C/(r-g)
PV of infinite growing annuity that starts