AC212
Principles of Finance
Exam Answers
1 a-c see attached spreadsheet d: The analysis in part c requires that semistrong form efficiency holds so that the publicly available information is fully
and
Lecture 9: Options Pricing Theory
Options Pricing Theory
Two Option Valuation Methods
Binomial and Continuous-time Models
The Black-Scholes Model
Option Pricing with Dividends
Based on Chapter 21
FM212 Class Assignments (Michaelmas Term 2014)
Hand in Problem Set 2
Please hand a paper copy and Departmental Cover Sheet of your work to your class teacher at the
beginning of class 8 (week 9).
Mini
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 1
1.
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 7
19
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 9
25
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 3
7.
Summer 2007 examination
AC212/AC492
Principles of Finance
2006/2007 syllabus only not for resit candidates
Instructions to candidates
Time allowed: 3 hours
This paper contains ten questions. Answer fo
FM212 Class Assignments (Michaelmas Term 2014)
Hand in Problem Set 1
Please hand a paper copy and Departmental Cover Sheet of your work to your class teacher at the
beginning of class 4 (week 5).
Mini
Lecture 6: Portfolio Theory
Portfolio Theory and Asset Pricing
Equilibrium
Markowitz Portfolio Theory
Mean Variance Optimization
Role of the CAPM
Evidence regarding CAPM
Some Alternative Theories
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 8
22
FM212 MT2014 Problem Set Solutions
Class 3
7.
Since dividends are paid quarterly, we can value them as a perpetuity using a quarterly
1
discount rate of (1.15) 4 - 1 = 3.556% then, P=$0.5/0.03556=$14.
QUESTION 1
Stock A
Stock B
Riskfree
market
expected return variance beta
8.80%
12.00%
11.20%
14.00%
4.00%
0.00%
10.00%
9.00%
PART A
From CAPM
ER(A)=4+0.8*(10-4)
ER(B)=4+1.2*(10-4)
CML:
Y intercept
Slo
Lecture 5: Risk and Return
Risk and Return
Over a Century of Capital Market History
Measuring Portfolio Risk
Calculating Portfolio Risk
Beta and Unique Risk
Diversification & Value Additivity
Bas
Summer 2009 examination
FM212/FM492
Principles of Finance
LSE 2009/GY999
Page 1 of 15
SECTION A
1
Assume for parts (a) to (f) that the Capital Asset Pricing Model holds. The
market portfolio has an e
FM212 Summer 2012 Solution Sketch
1
Oil Well
(A)
$100 per barrel
(B)
110 = (1.01 + nsc)^2*100 so nsc = 3.88%
(C)
Zero. This risk is uncorrelated with the global economy or market, since
changes in the
Company: Home Depot (NASDAQ: HD)
1.a
1.a
1.c
2
2
2
2
2
2
3
3
3
Stock Price on 3/2/2012
No. of shares outstanding
Cost of debt (rd)
Short term debt/ Current Portion of Long Term Debt
Long term debt
7
C
Date
Monday, October 07, 2002
Friday, November 01, 2002
#
Thursday, January 02, 2003
#
Monday, March 03, 2003
Tuesday, April 01, 2003
Thursday, May 01, 2003
Monday, June 02, 2003
Tuesday, July 01, 200
Lecture 7: Market Efficiency
The Six Lessons of Market Efficiency
What is an Efficient Market?
Random Walk
Efficient Market Theory
The Evidence on Market Efficiency
Puzzles and Anomalies
Six Les
Lecture 4: Valuing Government Bonds
Valuing Government Bonds
Real and Nominal Rates of Interest
The Term Structure and Yield to Maturity
(YTM)
How Interest Rate Changes Affect Bond
Prices
Explaini
Lecture 10: Forwards and Futures
Forwards and Futures
Hedging with Commodity Forwards
Cash Settlement vs. Delivery
Marking-to-market
Forwards and Futures
Financial Futures Pricing
Commodity Futu
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 2
4.
Lecture 1: Present Value
Present Value
Introduction to Present Value
Foundations of the Net Present Value Rule
Based on Chapter 2 in BMA
FM212
Principles of Corporate Finance
Values and Discounting
The London School of Economics and Political Science
Department of Finance
FM212: Principles of Finance
Lecturers:
Professor Christopher Polk
Professor Richard Payne
Administration:
Student Informatio
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 10
2
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 5
13
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 6
16
FM212 Class Assignments (Michaelmas Term 2014)
Each class assignment in Part 1 consists of 3 questions. Students should attempt written answers
to the questions before the respective class.
Class 4
10