LG4-1 Create a cash flow time line.
LG4-2 Compute the future value of money.
LG4-3 Show how the power of compound interest increases wealth.
LG4-4 Calculate the present value of a payment made in the future.
LG4-5 Move cash flows fr
Which of following is not a characteristic of a qualified pension plan?
It can be limited to highly compensated salaried employees.
The accounting for defined contribution pension plans is easy because each year:
The employer records pension e
LG5-1 Compound multiple cash flows to the future.
LG5-2 Compute the future value of frequent, level cash flows.
LG5-3 Discount multiple cash flows to the present.
LG5-4 Compute the present value of an annuity.
1. GAAP requires that some lease agreements be accounted for as possible. The theoretical justification
for this treatment is that a lease of this type. : D. Conveys most of the risks and benefits of
Distingusihing between oper
LG1-1 Define the major areas of finance as they apply to corporate financial management.
LG1-2 Show how finance is at the heart of sound business decisions.
LG1-3 Learn the financial principles that govern your personal decisions.
Dividend Policy at Linear Technologies
Each group is required to submit ONE two-page memorandum on the cases online through
the EKU website by midnight November 11th.
The memorandums should be typed. They should be written as if you were presenting it to
PROBLEM SET: Summarizing
Exercise 1. Present Value 
You are given the following prices Pt today for receiving risk free payments t periods from now.
1. Calculate the implied interest rates and graph the term structur
BEYOND CASH DIVIDENDS:
Shares of stock in a firm give their holders equal claims on all of the assets of the
firm, after the firm has met its debt obligations. Thus, the value of a share in Boeing or the
a) If each stock is priced at $100, the net expected returns on each stock to:
i. Pension fund:
Stock A = 10
Stock B = 10
Stock C = 10
Stock A = 10 (1-0.35) = 6.5
Stock B = 5 (1-(0.3)*(0.35) + (51-0.35) = 7.725
Stock C = 10 (1-(
Fuqua School of Business
FINANCE 351 - CORPORATE FINANCE
Problem Set #8
Prof. Simon Gervais
Fall 2011 Term 2
1. Hors dAge Cheeseworks has been paying a regular cash dividend of $4 per share each year for
over a decade. The compan
Immunization and Cash Flow
M t hi
- a potential cash outlay to be made at the future date to
satisfy the contractual terms of an obligation
- Institutional investors are concerned with both
the amount of the li
Chapter 16 &17
Interest-Rate Models &
Analysis f B d ith E b dd d
A l i of Bonds with Embedded
Concept of no arbitrage
Risk neutral pricing
Valuation of the yield curve - Binomial
Active Bond Portfolio
t St t i
1 Active Bond Investment Strategies
to achieve returns more than commensurate
with risk borne
- Use interest rate forecasts or the yield curve shift to
predict bond pri
Introduction to Bond Portfolio
1 Investment management process
1. Setting investment objectives
- will vary by type of financial institution
- Insurance companies banks pension funds hedge funds
13. Return, Risk, Security
Efficient Market Hypothesis
Efficient Market Hypothesis (EMH)
Says that "since an asset's current market price
fully reflects all available information affecting
the asset's value, it is not possible to
Value (or price) of an asset = PV of the future
CFs to be generated from that asset.
i.e., Price (or value) = DCFs.
In the valuation exercise,
1) figure out future CFs from an asset
2) find PV of the future CFs.
Capital Budgeting : the process of analyzing potential
expenditures on L-T assets (or fixed assets) & deciding
whether those investments should be undertaken.
The process of capital budgeting consists of :