1. Briefly explain the value additivity property.
For example, the net present value (NPV) of a combined project-say A and B-is equal to the
NPV(A) plus the NPV(B). Naturally, this property holds for present values also. This property is not
shared by IRR
1 Explain the term corporation
A corporation is a legal entity and has an existence of its own. Generally, large businesses are
organized as corporations.
2 Briefly explain the term limited liability.
The shareholders of a corporation cannot be held perso
1.Briefly explain the difference between company cost of capital and project cost of capital.
If a firm is considering projects that have the same risk as the firm, then the company cost of
capital is the same as the project cost of capital. However, if t
Professor: Samuel Nicolosi
Name: Yin Xi
Date: 12/1/2014
Course: English 110
The American dream of Asian Immigrants
In the mid-1800, Chinese immigrants were lured to America by tale of Califonia s
gold rush. Because of a dramatic increasing population of C
THE UNIVERSITY OF WESTERN ONTARIO
DEPARTMENT OF STATISTICAL AND ACTUARIAL SCIENCES
FM 2555/9555 MIDTERM TEST#2
Thursday November 13th, 2014, 6:00 - 8:00 PM
INSTRUCTIONS:
This is a CLOSED BOOK TEST.
Use ONLY AN HB PENCIL for the Scantron sheet.
Fill in NAM
1
3
2
3
4
5
You cannot predict the pattern of the stock return
6
7
8
9
10
11
12
13
14
In the expected return equation, the minus sign should be the plus sign.
15
16
17
18
19
20
21
22
Bullish
Bearish
23
24
2016-11-05
CHAPTER
9
9-1
RISK AND THE COST OF
CAPITAL
1
2016-11-05
Topics Covered
9-2
Company and Project Costs of Capital
Measuring the Cost of Equity
Analyzing Project Risk
Certainty Equivalents - Another Way to Adjust
for Risk
2
2016-11-05
Company
2016-10-31
CHAPTER
8
PORTFOLIO THEORY AND THE
CAPITAL ASSET PRICING MODEL
1
2016-10-31
Topics Covered
8-2
Harry Markowitz and the Birth of Portfolio
Theory
The Relationship between Risk and Return
Validity and the Role of the CAPM
Some Alternative The
1
2
3
27
27
5
Bid price The prices at which investors are willing to buy shares.
Ask price The prices at which current shareowners are willing to sell their shares.
Bid-ask spread The difference between the bid price and the ask price.
Market order An
FM 2555A
Solutions to Chapter 8 Practice Exercises
Problem [1/212]
Here are the returns and standard deviations for four investments.
Return (%)
Treasury bills
Stock P
Stock Q
Stock R
6
10
14.5
21
Standard
Deviation (%)
0
14
28
26
Calculate the standard d
CHAPTER
6
6-1
MAKING INVESTMENT DECISIONS
WITH THE NET PRESENT VALUE RULE
Topics Covered
6-2
Applying the Net Present Value Rule
Example - IM&C Fertilizer Project
Using the NPV Rule to Choose among Projects
o The Investment Timing Problem
o The Choice
CHAPTER
INTRODUCTION TO RISK
AND RETURN
7
Topics Covered
7-2
Over a Century of Capital Market History in
One Easy Lesson
Measuring Portfolio Risk
Calculating Portfolio Risk
How Individual Securities Affect Portfolio Risk
Diversification & Value Addit
FM 2555A
Chapter 8 Practice Exercises
Problems below, unless indicated otherwise, were taken from Brealey, R. (2017),
Principles of Corporate Finance, 12th edition, McGraw-Hill Education, New York.
N.B.: You will learn and benefit more if you attempt solv
Chapter 08 - Portfolio Theory and the Capital Asset Pricing Model
Chapter 8 Portfolio Theory and the Capital Asset Pricing Model
OVERVIEW
This is a very important chapter as it deals with portfolio theory and the Capital Asset Pricing Model
(CAPM). The co
Chapter 07 - Introduction to Risk and Return
Chapter 7 Introduction to Risk and Return
OVERVIEW
This chapter provides a historical overview of return and risk for various securities like stocks, bonds, and
T-bills. It lays the foundation for understanding
Chapter 06 - Making Investment Decisions with the Net Present Value Rule
Chapter 6 Making Investment Decisions with the Net Present Value Rule
OVERVIEW
In this chapter, many practical aspects of capital budgeting are covered. From a practical point of vie
Financial Modelling I
FM 3520 B
Week 2: Forward and Futures Pricing
and Trading
Outline
Relevant reading: Section 6.2 of CVZA and
Chapters 2 and 5 of HULL.
Preliminaries:
Types of assets and definition of arbitrage.
Forward prices of investment assets
Financial Modelling I
FM 3520 B
Week 1: Introduction
Overview
Course outline
Introduction to the course, purpose,
description, main focus
Tentative weekly outline
Review
Introduction
Financial Modelling I (FM3520B)
2
Course outline
Instructor Informa
Financial Modelling I
FM 3520 B
Week 3: Options and Option Trading
Strategies
Outline
Relevant reading: Chapters 10 and 12 of HULL.
Mechanics of options markets:
Payoffs.
Underlying assets.
Terminology
Trading strategies with options:
Why should we
Commodity Markets
BASIC IDEAS; HISTORICAL REMARKS, BUSINESS
JUSTIFICATION, CONNECTION BETWEEN SPOT
AND FORWARDS, SWING OPTIONS
(NOTE FOR WEEK 2 OF 3520 FOCUS ON SLIDES 128 ONLY; REST MAY MAKE SENSE LATER)
MATT DAVISON
THE UNIVERSITY OF WESTERN ONTARIO
Wha
Technical Note No. 24*
Options, Futures, and Other Derivatives, Ninth Edition
John Hull
Proof That Forward and Futures Prices
Are Equal When Interest Rates Are Constant
This Note demonstrates that forward and futures prices are equal when interest rates
a