Background
Spark Publishing and Printing House (SPPH) publish, print and distribute academic
literature, technical manuals, religious books and best sellers. SPPH business is sub-divided
in two departments: publishing and printing & distribution (P&D). SP
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
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
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
FIN 502
Fall 2015
Homework Assignment 2
Due on October 19 by 6pm (A2)
Problem 1
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 in order to in
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
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
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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
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
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
FIN502
Forwards and Futures
Lecturer: Carmen Stefanescu
Risk Management
Firms convert inputs into goods and services.
output (price)
inputs (price)
Producer
Buyer
Decision making process of corporations
What to buy - Capital Budgeting (real assets; finan
FIN 502
Capital Budgeting
Lecturer: Carmen Stefanescu
Capital Budgeting
Capital budgeting = the process of analyzing investment
opportunities and deciding which ones to accept
o Projects type: Cost Saving (replacement decisions), Revenue
Expansion (new a
FIN 502
Equity Valuation (Chapter 9 of the
text book)
Lecturer: Carmen Stefanescu
Equity Valuation
Characteristics
Equity valuation: determine the intrinsic value of common stocks. A
valuation model converts a set of forecasts of a series of company
and e
FIN 502
Alternative Investment Criteria
Lecturer: Carmen Stefanescu
Investing Criteria
Deciding on taking a project
o NPV
o Profitability Index (PI)
o Internal Rate of Return (IRR)
o Payback rule
A good criterion or evaluation method should
o Consider a
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NAME: _
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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
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