Solution Key to Problem Set 1 ECN 134 Finance Economics Part A: Investment Environment 1.a. Cash is a financial asset because it is the liability of the federal government. b. No. The cash does not directly add to the productive capacity of the economy. c
Solution to Problem Set 5 ECN 134 Finance Economics Part A: Optimal Risky Portfolio 1. a. Even though it seems that gold is dominated by stocks, gold might still be an attractive asset to hold as a part of a portfolio. If the correlation between gold and
Solution to Problem Set 4 ECN 134 Finance Economics Prof. Farshid Mojaver Risk and Return 1. You consider investing in one of three portfolios X, Y, or Z, for one year. The following matrix gives the means and standard deviations of annual returns in % fo
ECN 134, SSII09
Problem Set 6
3-You have $500 to invest. You decide to split it into two parts. The return on each $250 will be determined by a coin flip. If the coin comes up heads the investment will return 10%, and if it comes up tails the investment r
Problem Set 5 (ECN 134) Finance Economics Optimal Risky Portfolio part 1 Prof. Farshid Mojaver
1. Stocks offer an expected rat of return of 18%, with a SD of 22%. Gold offers an expected return of 10% with a SD of 30%. a. In light of the apparent ineffici
Problem Set 6
ECN 134
Financial Economics
Prof. Farshid Mojaver
On Financial Crisis
1- What was the role of deregulation in the financial crisis of 2008?
2- What is systemic risk? How did it happen during the financial crisis of 2008?
3- Why housing price
Solution Key to Problem Set 3 ECN 134 Finance Economics Prof. Farshid Mojaver Stock Valuation 1 1. We need to find the required return of the stock. Using the constant growth model, we can solve the equation for k. Doing so, we find: k = (D1 / P0) + g = (
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Homework 1 - Economics 134
Due Date: January 19, 201 7 (in lecture)
I. (Welch, 2.651) A project has the following cash ows in periods 1 through 4:
-$200,$200,-$200,$200. If the interes
FINANCIAL RATIOS
FIVE BROAD GROUPS:
1. LIQUIDITY (S-T SOLVENCY)
2. LEVERAGE RATIO (L-T SOLVENCY)
3. ASSET MANAGEMENT, TURNOVER OR ACTIVITY RATIOS
4. PROFITABILITY RATIOS
5. MARKET VALUE RATIOS
LIQUIDITY
1. CURRENT RATIO -
CURRENT ASSETS
CURRENT LIABILITIE
Problem Set 7
ECN 134
Financial Economics
CAPM
Prof. Farshid Mojaver
1. Two investment advisers are comparing performance. One averaged a 19% rate of return and the other
16%. However, the beta of the first investor was 1.5, whereas that of the second was
Solution to Problem Set 5
ECN 134
Financial Economics
Prof. Farshid Mojaver
On Financial Crisis
1- What is a speculative bubble, give a few historical example, how do they happen?
2- What was the role of deregulation in the financial crisis of 2008?
3- Wh
Problem Set 4
ECN 134
Finance Economics
Prof. Farshid Mojaver
Part: A Buy or not to Buy a House
1. As a first time home buyer you can buy a home now when interest rates are low (5.5%)
and received the $8,000 tax credit $8,000 for a $230,000 home or you ca
Problem Set 3
ECN 134
Financial Economics
_
Prof. Farshid Mojaver
Part A: Present Value
Use 5 significant (nonzero) digits in rate calculations, e.g., .12345 for 12.345%. Rates are
effective unless marked as stated. Show your work. Box your answers promin
ECN 134: Solution Key to Problem Set 2
Financial Economics
Prof. Farshid Mojaver
Part A:
CF Statement. You are given the following information of XYZ Corporation for 2011 and 2012.
a) Write the 2012 income statement using the information in the table.
b)
Your Name:_ Practice Midterm 2 Financial Economics * Descriptive and Conceptual Questions
[6 pts] 1. Describe advantages of the two-stage FCFE model over the two-stage DDM model.
The DDM cannot be used to estimate the value of a stock that pays no divid
Financiad Economics ECN134 Midterm 1 Winter 2009 Prof. Farshid Mojaver * * [20 pts] 1- Some Financial Terms and Ideas i. What is securitization? Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineeri
Solution Key to Problem Set 2 ECN 134 Finance Economics Mojaver Prof. Farshid
Part A: Financial Crisis The Fed cut rates too low for too long Easing of mortgage lending standards followed by tightening Expansion of credit through poorly underwritten and o
Problem Set 2 ECN 134 Financial Economics _ Prof. Farshid Mojaver Part A: 2008 Financial Crisis How did the 2008 financial crisis happen? Part B: Present Value and Bond Valuation 1. Whitney wants to put $100,000 down on a house five years from now. She pl
Solution to Problem Set 4 ECN 134 Finance Economics Prof. Farshid Mojaver Risk and Return 1. Let rx, ry, rz be returns of portfolios X,Y, and Z. (i) P(rx <0) = P(z<(0-5)/20) = P(z< -0.25) is greater than P(ry <0) = P(z<(0-7)/20) = P(z< -0.35), which in tu
Problem Set 4 ECN 134 Finance Economics Risk and Return Prof. Farshid Mojaver
1. You consider investing in one of three portfolios X, Y, or Z, for one year. The means and standard deviations of annual returns in % for the three portfolios are given by the
Financiad Economics ECN134 Midterm 1 Winter 2009 Prof. Farshid Mojaver * * [20 pts] 1- Some Financial Terms and Ideas i. What is securitization? ii. What is financial engineering? iii. What is Credit Default Swap (CDS)? iv. How might CDS have contributed