Practice Questions
Time Value of Money (TVM)
Note: all interest rates are quoted with annual compounding except when stated
otherwise.
1.
(Compound and Simple Interest) You put $1,000 in a CD that pays 8% annually.
a. How much is it worth at the end of ye
Practice Questions with Solutions
Valuing Debt
1.
You must invest $100,000 and the bonds listed below from A to D are the only investments available today
(assume that it is possible to buy a fraction of a bond in order to invest the full $100,000 for
FIN 502
Fall 2015
Solution - Assignment 2
Due on October 19 by 6pm (A2)
Problem 1 [12 points]
You must invest $100,000 and the bonds listed below from A to E are the only investments available today (assume that it
is possible to buy a fraction of a bond
Practice Questions
Valuing Debt
1.
You must invest $100,000 and the bonds listed below from A to D are the only investments available today (assume
that it is possible to buy a fraction of a bond in order to invest the full $100,000 for example it is p
Practice Questions
Time Value of Money (TVM)
Note: all interest rates are quoted with annual compounding except when stated
otherwise.
1. (Compound and Simple Interest) You put $1,000 in a CD that pays 8% annually.
a. How much is it worth at the end of ye
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FIN502
Capital Asset Pricing Model
Market Efficiency
Multifactor Models of Risk
Lecturer: Carmen Stefanescu
Outline
Capital Asset Pricing Model (CAPM)
Assumptions
Portfolio theory implications
CAPM implications
Capital Market Line and Security Market
FIN502
Real Options
Lecturer: Carmen Stefanescu
Capital Budgeting:
Discounted Cash Flow and NPV
Using NPV rule in capital budgeting:
Forecast project's expected future cash flows
Discount cash flows using discount rate reflecting:
Time value of money
FIN502
Risk and Return
Portfolio Choice
Lecturer: Carmen Stefanescu
Outline
A first look at risk and return
Measures of risk and return
Probability distributions
Expected mean
Variance and standard deviation
Historical returns. Trade-off between ris
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BE SURE TO PUT YOUR NAME AND STUDENT ID NUMBER ON THE TOP OF THE NEXT PAGE
OF THIS EXAMINATION.
REMEMBER TO SHOW ALL WORK.
PLEASE FOLLOW ALL DIRECTIONS.
The next page contains general
NAME: _
DO NOT TURN THIS PAGE UNTIL THE INSTRUCTION TO BEGIN IS GIVEN.
BE SURE TO PUT YOUR NAME AND STUDENT ID NUMBER ON THE TOP OF THE NEXT PAGE
OF THIS EXAMINATION.
REMEMBER TO SHOW ALL WORK.
PLEASE FOLLOW ALL DIRECTIONS.
The next page contains general
FIN502
Options
Lecturer: Carmen Stefanescu
Outline
Options
Call options and put options
Option basics
Payoffs and profits
Trading strategies: covered call and protective put
Option pricing
Factors affecting option prices
Binomial model
Black and
Practice questions
Midterm
1. Identify and value/calculate the following. By identify I mean tell me whether it is a perpetuity, a growing
perpetuity, an annuity, a growing annuity, a series of uneven cash flows, an annuity plus a perpetuity, an
annuity d
Practice questions
Midterm
1. Identify and value/calculate the following. By identify I mean tell me whether it is a perpetuity, a
growing perpetuity, an annuity, a growing annuity, a series of uneven cash flows, an annuity plus a
perpetuity, an annuity d
FIN 502
Fall 2015
Solutions - Assignment 1
Due at the beginning of class on October 5 (A2)
Problem 1 [12 points]
Lottery jackpots are paid out in equal installments with the first installment payable immediately when the owner
is confirmed (each lottery w
Practice Questions
Introduction
1.
You run a construction firm, and have just won a contract to build a government office
building. Two projects are available,and for each project the government will pay a subsidy in one
year upon the buildings completion
Practice Questions with Solutions
Introduction
1.
You run a construction firm, and have just won a contract to build a government office
building. Two projects are available, and for each project the government will pay a subsidy in
one year upon the buil
Practice Questions with Solutions
Risk and Return. Portfolio Choice.
Problem 1
Consider the following information about three assets and the market:
Rate of Return if State Occurs
State of
Economy
Boom
Average
Recession
Probability of
State of Economy
0
Practice Questions with solutions
Real Options. Forwards and Futures
Problem 1
Your company considers entering the shoe business and believes there is a very narrow window for entering the business.
The winter holidays are approaching, and either you in
Practice Questions with solutions
Options
Problem 1
MyContacts Online Inc. (MCO) stock currently sells for $60 per share. Consider a European put option on MCO stock
with a strike price of $66 and time to expiration of six months. This option sells for
Practice Questions with solutions
CAPM
Problem 1
Consider two stocks A and B and the index model regressions (subscript t is suppressed in the notation of the regression
equation: rA r f = + (rM r f ) + ) are estimated. The standard deviation of market
Practice Questions
Real Options. Forwards and Futures
Problem 1
Your company considers entering the shoe business and believes there is a very narrow window for entering the business.
The winter holidays are approaching, and either you invest today or i
Practice Questions
Options
Problem 1
MyContacts Online Inc. (MCO) stock currently sells for $60 per share. Consider a European put option on MCO stock
with a strike price of $66 and time to expiration of six months. This option sells for $9.
a. Draw a p
Practice Questions with solutions
CAPM
Problem 1
Consider two stocks A and B and the index model regressions (subscript t is suppressed in the notation of the regression
equation: rA r f = + (rM r f ) + ) are estimated. The standard deviation of market
Practice Questions with Solutions
Capital Budgeting
1.
You are thinking about getting a new grill for your backyard entertaining. You have a choice between a Weber
Kettle Grill that uses charcoal and a Weber Gas Grill that operates on a natural gas fe
Practice Questions
Risk and Return. Portfolio Choice.
Problem 1
Consider the following information about three assets and the market:
Rate of Return if State Occurs
State of
Economy
Boom
Average
Recession
Probability of
State of Economy
0.3
0.4
0.3
Ass
Practice Questions
NPV Rules and Capital Budgeting
1.
You are thinking about getting a new grill for your backyard entertaining. You have a choice between a Weber
Kettle Grill that uses charcoal and a Weber Gas Grill tha
Practice Questions
Valuing Equity
1.
Analysts expect that H.O.T. Ltd will report earnings of $300 million one year from today. H.O.T.s policy is to pay
75% of its earnings out in dividends (it paid its dividends already
Practice Questions with Solutions
Valuing Equity
1.
Analysts expect that H.O.T. Ltd will report earnings of $300 million one year from today. H.O.T.s policy is to pay
75% of its earnings out in dividends (it paid its divi