Econ 331 Financial Economics
Spring 2017
Tutorial 2 Answers
FNZ Chapter 4, questions 3, 4, 5, 6, 9 and 10 (pp.74-76)
Question 4.3
It should not impact the value of the stock in a perfect capital marke
Tutorial: Week 2
Tutorial questions
Q1. Develop the formula of IRR (
Q2. Develop the formula of IRR (
) for the case where T=1.
) for the case where T=2.
Solution
Recall that
t
T
1
1
NPV
( Rt Ct
FINANCIAL ECONOMICS:
LECTURE NOTES
Prepared by
Amnon Levy, PhD (U.C. Berkeley)
Professor of Economics
University of Wollongong
Spring 2015
Some books for supplementary readings
Jan Mossin (1973), Theo
Solution of Exercise 1
Firm A invest every year 1,000,000 dollars on production capital. Its production capital
depreciates at a rate of 0.1 per annum. Its present production capital stock is 5,000,00
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Tutorial: Week 4
Two-period consumption and saving
Let,
u = C 0 0.5 + 0.9C10.5
y=
y=
$ 60, 000
0
1
r = 0.08 .
1. Prove that the optimality condition leads to:
2
0.45
C1*
(1 + r ) C0* .
=
0.5
From t
Tutorial: Week 1
Tutorial questions
Q1. Develop the formula of IRR ( ) for the case where T=1.
Q2. Develop the formula of IRR ( ) for the case where T=2.
Solution
Recall that
t
T
1
1
NPV
=
( Rt
Week 9 Tutorial Question
John derives utility from the market value (W) of his prime asset - a bungalow in Paradise
Beach - separately from his other utility-generating assets. His utility from the ma
Econ 331 Financial Economics
Spring 2017
Assignment 1
Due date: Monday, September 4.
Students enrolled in Monday tutorials: submit your assignment in your tutorial.
Students enrolled in Thursday tutor
Econ 331 Financial Economics
Spring 2017
Assignment 2
Due date: Oct 19 (Thursday of Week 13) by 14:30.
Question 1 (CAPM)
Consider the following data representing security analysts estimates of the exp
Econ 331 Financial Economics
Spring 2017
Tutorial 1 Answers
Math Review: Constrained Optimization
Given a fencing perimeter of length p how do we maximize the fenced area, provided that the area
must
Econ 331 Financial Economics
Spring 2017
Tutorial 8 solutions
Question 1
Suppose an economy has one risk-free asset with the return rRF and two risky assets with expected
returns E ( r1 ) and E ( r2 )
Econ 331 Financial Economics
Spring 2017
Tutorial 4 answers
Questions to be discussed in this tutorial:
Question 1
Alice owns a house with a market price of 10 million dollars. She is an expected util
Econ 331 Financial Economics
Spring 2017
Tutorial 7 solutions
Question 1
Suppose that the risk-free rate of return is 6% and the expected rate of return on the market is 16%.
(a) A stock has an expect
Solution to In-Session Exam in ECON331 Spring 2015
Solution to Question 1
Note that
t
T
1
1
NPV
( Rt Ct It )
ST 0
t 0 1
1
T
With T=1,
( R0 C0 I 0 )
( R1 C1 I1 ) S1
0
1
( R1 C1 I1 ) S1 ( R0