Chapter 9
Hypothesis Tests
Learning Objectives
1.
Learn how to formulate and test hypotheses about a population mean and/or a population proportion.
2.
Understand the types of errors possible when conducting a hypothesis test.
3.
Be able to determine the

Chapter 12
Simple Linear Regression
Learning Objectives
1.
Understand how regression analysis can be used to develop an equation that estimates
mathematically how two variables are related.
2.
Understand the differences between the regression model, the r

CHAPTER 10
EQUITY MARKETS
ANSWERS TO END-OF-CHAPTER QUESTIONS
3.
Rowell Inc. has 100 million shares of common stock outstanding and the company is
electing seven directors by means of cumulative voting. If a group of minority
shareholders controls 31 mill

CHAPTER 7
ANSWERS TO END-OF-CHAPTER QUESTIONS
1.
Calculate the bond equivalent yield for a 180-day T-bill that is purchased at a 6%
"ask" rate. If the bill has a face value of $10,000, calculate its price.
First calculate the price of the T-bill using eq.

CHAPTER 8
BOND MARKETS
ANSWERS TO END-OF-CHAPTER QUESTIONS
1.
Calculate the gross profit that an underwriter would make if it sold $10 million worth of
bonds at par (face value) and paid the firm that sold the bonds 99.25% of par.
The gross profit would b

CHAPTER 11
DERIVATIVES MARKETS
ANSWERS TO END-OF-CHAPTER QUESTIONS
11.
Assume that in March a farmer and a baker enter into a forward contract on a thousand
bushels of wheat at a price of $3.00 per bushel for delivery in September. In September
the spot p

CHAPTER 9
ANSWERS TO END-OF-CHAPTER QUESTIONS
1.
If you had a 7 percent, $100,000 30-year fixed-rate mortgage, how long would it take
before you had repaid half the loan balance due? If you paid an extra $100 per month to
reduce the principal due on the m

Chapter 1 Problems
Problem 1.22.
Describe the profit from the following portfolio: a long forward contract on an asset and a
long European put option on the asset with the same maturity as the forward contract and a
strike price that is equal to the forwa

CHAPTER 5
Determination of Forward and Futures Prices
Practice Questions
Problem 5.1.
Explain what happens when an investor shorts a certain share.
The investors broker borrows the shares from another clients account and sells them in the
usual way. To cl

CHAPTER 4
Interest Rates
Practice Questions
Problem 4.1.
A bank quotes you an interest rate of 14% per annum with quarterly compounding. What is
the equivalent rate with (a) continuous compounding and (b) annual compounding?
(a) The rate with continuous c

CHAPTER 3
Hedging Strategies Using Futures
Practice Questions
Problem 3.1.
Under what circumstances are (a) a short hedge and (b) a long hedge appropriate?
A short hedge is appropriate when a company owns an asset and expects to sell that asset in the
fut

CHAPTER 12
INTERNATIONAL MARKETS
ANSWERS TO END-OF-CHAPTER QUESTIONS
1.
If a bushel of corn costs 3.00, and a British pound is worth $1.50, how many dollars would a
person receive for 100,000 bushels of corn sold in Britain in the spot market? If the deli

CHAPTER 6
Interest Rate Futures
Practice Questions
Problem 6.1.
A U.S. Treasury bond pays a 7% coupon on January 7 and July 7. How much interest
accrues per $100 of principal to the bond holder between July 7, 2011 and August 9, 2011?
How would your answe

CHAPTER 7
Swaps
Practice Questions
Problem 7.1.
Companies A and B have been offered the following rates per annum on a $20 million fiveyear loan:
Company A
Company B
Fixed Rate
5.0%
6.4%
Floating Rate
LIBOR+0.1%
LIBOR+0.6%
Company A requires a floating-ra

MAT 272 Linear Algebra
Additional Subspace problems. On Nov. 17 there will be an in-class quiz in which you will be
required to prove one of the following completely and accurately. In each problem the letters a,
b and c represent real numbers
1) Prove th

Beta
0.87
Number of Contracts
Rounded
Index now
Index Level in Two Months
Return on Index in Two Months
Return on Index incl divs
Excess Return on Index
Excess Return on Portfolio
Return on Portfolio
Portfolio Gain
Futures Now
Futures in Two Months
Gain o

MAT 272 Assignment #6
Due: Dec. 10, 2009
1) Let V be a vector space with basis . Let x,y V with coordinates relative to B of cfw_c1,c2,
, cn and cfw_d1, d2, dn respectively.
a. Find coordinates for x + y and kx relative to B.
b. Are your coordinates uniqu

MAT 272 Assignment #6 - solutions
Due: Dec. 10, 2009
1) Let V be a vector space with basis
. Let x,y
relative to B of cfw_c1,c2, , cn and cfw_d1, d2, dn respectively.
a. Find coordinates for x + y and kx relative to B.
and
V with coordinates
so
and
Simila

MAT 272 Assignment #6 - solutiuons
Due: Dec. 10, 2009
1) Let V be a vector space with basis . Let x,y V with coordinates relative to B of cfw_c1,c2,
, cn and cfw_d1, d2, dn respectively.
a. Find coordinates for x + y and kx relative to B.
and so
and
Simil

MAT 272 Assignment #5
Due: October 27, 2009
1) Show that the set V of all 23 matrices is a vector space.
2) Show that the set H of 23 matrices of the form is a subspace of the vector space V in
#1.
3) Show that the set of polynomials of the form is a vect

MAT 272 Assignment #5
Due: October 27, 2009
1) Show that the set V of all 23 matrices is a vector space.
Let
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
ix)
x)
2) Show that the set H of 23 matrices of the form
is a subspace of the vector
space V in #1.
i)
ii)
iii)