Question 3
3. Duration calculations
A bond with 4 years to maturity has an annual coupon rate of 5% and face value
$1000.Couponsarepaidsemi-annually.Assumethattheyieldcurveisflatandyields
areat9%.
(a)
Covariance and Correlation
Portfolio risk depends on the correlation
between the returns of the assets in the
portfolio
Covariance and the correlation coefficient
provide a measure of the way return
Asset Pricing
ECONM2035
Mean-variance analysis
Returns and Risk
Previously we saw that:
higher risk securities tend to have higher
mean returns
broad-based portfolios tend to have much
smaller risk
Bond Duration and Convexity
On completion of this tutorial, you will be able to:
measure the price volatility of a bond using the concept of duration
and modified duration
calculate the degree of non-
Asset Pricing
ECONM2035
Choice, uncertainty and risk
Bonds and Stocks
Very different characteristics
Standard asymmetric info arguments show
that bonds are safer than stock (whose
perspective?)
Ref
Asset Pricing
ECONM2035
Fixed Income Securities
Bond Characteristics
Face or par value
Coupon rate
Zero coupon bond
Compounding and payments
Accrued Interest
Indenture
Different Issuers of Bonds
RANDOM VARIABLES
A discrete random variable is a function whose values are determined by the
events of a finite sample space.
Consider the experiment of tossing a fair coin three times. The outcomes c
Asset Pricing
ECONM2035
Review of Probability and Statistics
(SW Chapters 2, 3)
1
Review of Statistical Theory
1.
2.
3.
4.
The probability framework for statistical inference
Estimation
Testing
Confid
Chapter 1 or 3
THE END OF THE STAND-ALONE INVESTMENT BANKING INDUSTRY
Until 1999, the Glass-Steagall Act had prohibited U.S. banks from both accepting
deposits and underwriting securities. In other wo
Sampling from a Normal Distribution
Given an infinite population, a sample is random if each observation (of a
measurement or an outcome) is independent of every other observation.
Let Xi , i=1.N, be
Example: Discrete Multivariate Random Variables
Assume the fluctuation of sterling against the dollar and DM can be summarised by the
following distribution function:
X
Sterling Against
DM
Y
$
1.5
2.0
EXAMPLE : DETERMINING NORMAL PROBABILITIES
(i)
Given X ~ N (5,4) what is P (X > 6.5) and P (X < 3.5) ?
2 = 4
X
Z=
5
Z
2
=1
X
6.5
0
z1 =
Z1
6.5 - 5
= 0.75
2
P (Z > 0.75) = 0.2266 = P (X > 6.5)
P (X <
Solution Slides 1
Asset Pricing: Problem set 1
1
1. Valuing coupon bonds using zero-coupon bond prices
a) Here were being asked to value the bond and compare its value to a price
of 985. The cashflows
Question 1
a.
Students are asked to value the bond and compare its value to a price of $985. The values
of $1 in 1, 2 and 3years time are given by:
Period Price DF
1 974/1000 0.974
2 958/1000 0.958
3
Problem Set 1 Answer Key
Corporate Finance
Question 1 [Cash flow calculation and capital budgeting (without uncertainty)]
a) Calculate the depreciation expenses for each year.
500
50
UNIVERSITY OF BRISTOL
Examination for the Degree of MSc in Finance and Investment
and in Economics and Finance
JANUARY 2016
EXAM PAPER NUMBER ECONM2035
ASSET PRICING
(Module No: ECONM2035)
Time allowe
Fundamentals of Corporate Finance
Revision Lecture
Dr Fangming Xu
University of Bristol
December 12, 2016
Dr Fangming Xu (University of Bristol)
Fundamentals of Corporate Finance
December 12, 2016
1 /
UNIVERSITY OF BRISTOL
Examination for the Degree of M.Sc. in
Finance and Investment
January 2015
LINKING CODE: ECON-M17 & 234
EXAM PAPER NUMBER ECONM2034J
CORPORATE FINANCE AND FINANCIAL STATEMENTS
(M
Feedback on Corporate Finance and Financial Statement Exam (January 2014)
SCHOOL of ECONOMICS, FINANCE and MANAGEMENT
EXAM FEEDBACK
(INCLUDING ILLUSTRATIVE ANSWERS FOR NUMERICAL SECTIONS)
Corporate Fi
Feedback on CFFS January 2016 Exam
SCHOOL of ECONOMICS, FINANCE and MANAGEMENT
EXAM FEEDBACK
(INCLUDING ILLUSTRATIVE ANSWERS
FOR NUMERICAL SECTIONS)
Corporate Finance and Financial Statements
January
FUNDAMENTALS OF CORPORATE FINANCE
GUIDE FOR EXAM PREPARATION FOR 2016/17 COURSE
EXAM FORMAT
This module is 100% assessed by means of a 3-hour examination in January 2017. You will
be required to answe
UNIVERSITY OF BRISTOL
Examination for the Degree of M.Sc. in
Finance and Investment
January 2016
LINKING CODE: ECON-M17 & 234
EXAM PAPER NUMBER ECONM2034J
CORPORATE FINANCE AND FINANCIAL STATEMENTS
(M
Feedback on CFFS January 2015 Exam
SCHOOL of ECONOMICS, FINANCE and MANAGEMENT
EXAM FEEDBACK
(INCLUDING ILLUSTRATIVE ANSWERS
FOR NUMERICAL SECTIONS)
Corporate Finance and Financial Statements
January
UNIVERSITY OF BRISTOL
Examination for the Degree of MSc in Finance and Investment
and in Economics and Finance
January 2014
EXAM PAPER NUMBER ECONM2035
ASSET PRICING
(Module No: ECONM2035)
Time allowe
Asset Pricing-coursework 7
The Green Team(5 p.m.- 6 p.m.)
Haojie Zhuang (1618809)
Ting Lai(1605639)
Yini Mao(1604125)
Xingpu Li (1619816)
Question1.
Assume that the stock market is semi-strong efficie
Asset Pricing-coursework 6
The Green Team(2 p.m.- 3 p.m.)
Haojie Zhuang (1618809)
Ting Lai(1605639)
Yini Mao(1604125)
Xingpu Li (1619816)
Question 3.
1. Suppose there are three portfolios on the APT s