Discount factor =
"
"#$
Annual realized return
,-
Time value of money' = 1 + ' ' =
"#$ .
=
+
1+
Arbitrage opportunity possible to make a profit without
taking any risk or making any investment.
No arbitrage pri
1-1
ADM 2352
Finance Theory
Lectures 20
Real Options
Real Versus Financial Options
Real Option
The right to make a particular business decision,
such as a capital investment
A key distinction between real options and
financial options is that real opti
ADM 2352
Suppose the market portfolio is equally likely to increase by 30% or decrease by 10%
a. Calculate the beta of a firm that goes up on average by 43% when the market goes
up and goes down by 17% when the market goes down.
b. Calculate the beta of
Contradiction of EMH: Irrationaiig: People will not always act
rationally, emotions and personal beliefs are influential
Overconfidence: People tend to overestimate the precision of their
beliefs or forecast and they tend to overestimate their investment
Chapter 14
Problem 7. Assume that you have shorted the call option in Problem 6.
a. If the stock is trading at $55 in three months, what will you owe?
b. If the stock is trading at $35 in three months, what will you owe?
c. Draw a payoff diagram showing t
Finance Theory
ADM 2352 X
Summer 2016
Revised Course Outline
Professor
Dr. Dev Gandhi, Ph.D., MBA
Office
Office Hours
DMS 7158
[email protected]
Only emails on serious issues and clarifications are
welcomed. For security purposes, a student must on
Portfolio weight=X i=
Value of investment i
Total value of portfolio
Weighted average return of portfolio=R p = x i Ri
i
Expected return of portfolio=E [R p ]= x i E [R i]
i
Covariancebetween return RiR j=Cov ( Ri , R j ) =E[ ( R iE [ R i ] )( R jE [ R j
Berk/DeMarzo, Corporate Finance
Chapter 25 Tables and Examples
This workbook contains tables and examples from Chapter 25. Data and
assumptions are shown as bold blue numbers. Change these numbers
to consider alternative scenarios.
Instructions
TABLE 25.1
Berk/DeMarzo, Corporate Finance
Chapter 31 Tables
INSTRUCTIONS
This workbook contains tables from Chapter 31. Data and
assumptions are shown as bold blue numbers. Change
these numbers to consider alternative scenarios.
TABLE 31.1
SPREADSHEET
Expected Fore
Solutions to End-of-Chapter Problems
Chapter 23
Raising Equity Capital)
23-1.
Private companies can raise equity capital from angel investors, venture capitalists, institutional
investors, or corporate investors.
23-6.
The two main advantages of going pub
Solutions to End-of-Chapter Problems
Chapter 29
Corporate Governance
29-2
Examples of agency problems are excessive perquisite consumption (more company
jets/company jet travel than needed, nicer office than necessary, etc.). Others are valuedestroying ac
Interest rate factor=1+r
Discount factor=1/(1+r)
No arbitrage price:
Price of security=PV of cash flow
Normal market:
NPV (buying or selling a security)=0
Value additively:
Price (c)=price (A+B)=price (A)+price (B)
E (r)= weak m (r)+ strong m (r)
A could
Short position in an option contract:
The investor takes the opposite side of the contract to the investor who bought the
option. Thus the sellers cash flows are the negative of the buyers cash flow.
Although payouts on a long position in an option contra
Finance Theory
ADM2352 A
Fall 2017
Professor
Samir Saadi, Ph.D.
Office
DMS 6157
Telephone
613-562-5800, ext. 7518
E-Mail
[email protected]
For security purposes, a student must only use his or her uOttawa email address when communicating with
Finance Theory
ADM 2352 A
Fall 2015
Professor
Samir Saadi, Ph.D.
Office
DMS 6157
E-Mail
[email protected]
E-mail should be used as a means to coordinate appointments only.
For security purposes, a student must only use his or her uOttawa email
ADM2352A
ASSIGNMENT 3
Samir Saadi
Catherine Li 6710035
Ailin Liu
7290406
Thu Nguyen 7428198
Question 1
When private companies become publicly-listed with an initial public offering (IPO) and
the closing price on first day higher than offer price, the stoc
Does Information Asymmetry Matter to Equity Pricing?
Evidence from Firms Geographic Location*
SADOK EL GHOUL, University of Alberta
OMRANE GUEDHAMI, University of South Carolina
YANG NI, Shanghai Jiao Tong University
JEFFREY PITTMAN, Memorial University
S
Finance Theory ADM 2352
Assignment # 3
Professor: Samir Saadi
Due: November 28, 2016
Jacob Knott, 777701
Jessica Massaad, 7751836
Judy Zhao, 7674938
7.
a)
K=$40
Expiration date = 3 months
S = $55
You are taking the short position which means you are selli
Finance Theory ADM 2352
Assignment # 1
Professor: Samir Saadi
Due: October 3, 2016
Questions: Chapter 3: Problem 19
Chapter 10: Problems 12, 18, 21, and 24
Jacob Knott, 777701
Jessica Massaad,
Judy Zhao,
Chapter 3
19.
a) What is the NPV of each project? W
1-1
ADM 2352
Finance Theory
Lectures 1 & 2
Overview
1-2
Goal of Financial Management
What should be the goal of a corporation?
Maximize profit?
Minimize costs?
Maximize market share?
Maximize the current value of the companys
stock?
Does this mean w
1-1
ADM 2352
Finance Theory
Lectures 12
Behavioural Finance (Part II)
1-2
Competition and Capital Markets
Identifying a Stocks Alpha
To improve the performance of their portfolios,
investors will compare the expected return of a
security with its requir
ADM 2352
Finance Theory
Lecture 13-14
Raising Capital
Outline
The Financing Life Cycle of a Firm: Early-Stage
Financing and Venture Capital.
The Public Issue
The Basic Procedure for a New Issue
IPOs and Under-pricing
New Equity Sales and the Value of
1-1
ADM 2352
Finance Theory
Lectures 11
Behavioural Finance (Part I):
An Introduction
Do Canadian Companies Use the CAPM?
Survey results from Saadi, Baker, and Dutta (2011)
Using CAPM: Some Concerns
Practical problems with estimating required returns
Es
1-1
ADM 2352
Finance Theory
Lectures 15-16
Corporate Governance
Principal-Agent Relation
1-3
1-4
1-5
Basics of Corporate Governance
By issuing corporate securities, firms sell claims to control the
companies` resources
The interests of the various securi
1-1
ADM 2352
Finance Theory
Lectures 17, 18, & 19
Financial Options
Option Basics
Financial Option
A contract that gives its owner the right (but not
the obligation) to purchase or sell an asset at a
fixed price at some future date
Call Option
A finan
FinanceTheoryADM2352
Assignment#1DueOctober7(inclass)
Chapter3:Problem19
Chapter10:Problems12,18,21,and24
Jiayue sun 7463899
KangKang Bai 6597471
Question 12
Bank A: ($1 million*0.95)*100=$95 million
Bank B: ($100 million*0.95) =$95 million
Thus, expected
ADM 2352
Solutions of Assignment 2
Problem 1
All 100 stocks have a common risk of markets (economys) ups and downs (volatility). They all
will go up or down together. Thus they all bear systematic risk (also called "non-diversifiable" or
"market risk"). T
Solutions to End-of-Chapter Problems
Chapter 3
Arbitrage and Financial Decision Making
3-10
a.
NPVA 10
NPVB 5
20
$8.18
1.1
5
$9.55
1.1
NPVC 20
10
$10.91
1.1
b. If only one of the projects can be chosen, project C is the best choice because it has th