ACTSC 221
Quiz #4
Note: Numerical answers are rounded to 2 decimal places.
1. What are the monthly payments on a $10,000 5-year loan if interest rates are i(2) = 6%?
(A) $192.59
(D) $194.11
(B) $192.99
(E) none of the above
(C) $193.33
2. John purchased a
ACTSC 221
Quiz #7
Note: Numerical answers are rounded to 2 decimal places.
1. A company is considering two projects, A and B. Assume the cost of capital for the
firm is 5% and both projects cost $30,000. If the cash flows from the projects are as
follows,
ACTSC 221
Written Assignment #2
1. Tommy and Timmy Twintz want to establish a scholarship that makes two payments
every year. They want the first payment of $5,000 to go to the very first freshman
who arrives on campus. The second payment of $20,000 will
ACTSC 221
Quiz #5
Note: Numerical answers are rounded to 2 decimal places. Round up all payments to
the nearest penny unless otherwise stated.
1. John borrowed $10,000 for his new car. He plans to repay the loan with monthly
payments over 5 years. Suppose
ACTSC 221
Quiz #3
Note: Numerical answers are rounded to 2 decimal places.
1. What are the monthly payments on a $10,000 5-year loan if interest rates are i(12) =
6%?
(A) $193.33
(D) $2,373.96
(B) $197.83
(E) none of the above
(C) $618.76
2. Suppose you b
ACTSC 221
Written Assignment #3
Question 1
Pizza Pizza is planning to open a new outlet in the math building, since we all know mathies
love pizza. The details of the project are as follows:
The initial cost of the project will be $1 million. Assume this
ACTSC 221
Quiz #2
Note: Numerical answers are rounded to 2 decimal places.
1. What is the price of a 30-day Government of Canada T-Bill if the rate is quoted at
2.2%? Assume a face value of $1,000.00.
(A) $998.17
(D) $998.21
(B) $998.19
(E) none of the ab
ACTSC 221
Written Assignment #1
Case Study 1
Emily wants to buy a new car for $25,300, including all fees and taxes. Nows a good time
to buy, claims the salesman, were offering 4 year loans at 5.9%. Even if you have the
cash, youre better off borrowing. E
ACTSC 221
Quiz #1
Note: Numerical answers are rounded to 2 decimal places.
1. Joe invests $1,000 for 4 years at an interest rate of 10% compounded annually. If Sam
invests the same amount also for 4 years, at what rate of simple interest does Sams
investm
ACTSC 221
Quiz #6
Note: Numerical answers are rounded to 2 decimal places. Coupon rates and interest rates
are expressed in annual nominal rates.
1. Find the value of a 5-year bond with a 7% coupon paid semi-annually trading with a
yield to maturity of i(
University of Waterloo
Math-Business Program
ACTSC 372: Corporate Finance, Spring 2017
Instructor: Dr. H. Fahmy
O ce: M3, second oor, room # 2018
E-mail: [email protected]
O ce hours: M/T from 12:00-1:30 PM or by appointment
Lecture: M/W, 10:00 - 11:20
ACTSC 372: Review Questions for Midterm
1. Consider a representative consumer who has a VN-M utility function given by the equation
U (w) =
ln w:
(a) State the preference assumptions that are necessary to guarantee the existence of a well-dened
utility fu
University of Waterloo
Math-Business Program
ACTSC 372: Corporate Finance
Assignment #1, Spring 2017
Instructions:
Dr. H. Fahmy
The Assignment is due on Monday, May 22nd, 2017 at the beginning of class sharp! Late
assignments are not acceptable.
Your grou
Actsc 446/846 (Winter 2016)
Solution to Assignment 1
1. (a) The payo to a long forward at expiration is equal to:
Payo to long forward = ST K
Therefore, we can construct the following table:
Price of asset in 6 months
40
45
50
55
60
Agreed forward price
5
Fact 2.1. We have
S0 ! CA(S0, K, T ) ! CE (S0, K, T )
K ! PA(S0, K, T ) ! PE (S0, K, T )
Proof.
29
Fact 2.2. We have
CA(S0, K, T ) ! CE (S0, K, T ) ! (PV(ST ) PV (K)+
PA(S0, K, T ) ! PE (S0, K, T ) ! (PV (K) PV(ST )+
Proof.
30
Early exercise for American
Example 3.2 (Revisit). Calculate the price of a 3-month European call option by a 3-step binomial model, using the formula
developed in the last slide. Assume K = 100, S0 = 100, u = 1.0594,
d = 0.9439, and r = 0.05.
22
Example 4.3. (Digital option) Consider the elementary single-period binomial
market model with parameters: r = 0.03 (continuously compounded interest
rate), S0 = 1, u = 2, d = 1/2 . Compute the price of a digital call option with
strike price K which is c
Example 5.1. Suppose S(0) = (100, 400, 500) and
50, 200, 300
S(1, ) = 100, 400, 500 .
50, 200, 250
Consider a trading strategy = (1, 1, +1)T , and respectively
calculate the portfolio value at time 0 and time 1 for the trading
strategy.
6
Example 5.2. Con
Example 3.2. Calculate the price of a 3-month European call
option by a 3-step binomial model. Assume K = 100, S0 = 100,
u = 1.0594, d = 0.9439, and r = 0.05.
18
ACTSC 372
Corporate Finance II
Course Review Part 1
C ourse Evaluation
First 10 minutes of class
http:/evaluate.uwaterloo.ca
(or Google uwaterloo evaluate)
https:/www.ratemyprofessors.com/
F inal E xam Word Cl oud
Outline
NPV and Other Investment Rule
ACTSC 372
Corporate Finance II
Chapter 18: Capital Budgeting for Levered Firms
R eview of C ap ital B udgeting
Given a project, we calculate its NPV as
Present value of after-tax operating cash flows (rent, cost, salvage, etc.)
Present value of Capital
ACTSC 372
Corporate Finance II
Course Review Part 2
Outline
Risk, Return, and Capital Budgeting
What is the right discount rate and how to calculate it?
Efficient Market Hypothesis: What is it? Why is it helpful?
Long-Term Financing: Stocks vs. Bonds
Formula Sheet
Part 1: Present Value ($1 initial payment)
Annuities and Perpetuities (discount rate = r)
T -periods Annuity
Perpetuity
1(1+r)T
r
1+g T
1
1
rg
1+r
1
r
1
rg
Level Payments
Growth rate = g
Part 2: Properties of Expectation, Variance, and Co
ACTSC 372
Corporate Finance II
Non-Textbook Topic: Utility Theory Part 3
P reference and Utility
Theorem 1 (no proof)
Preference relation that satisfies Axioms 1-5 (and other technical
assumptions) if and only if there exists a utility function such tha