FM212/FM492 Principles of Finance Problem Set Solutions
Class 4 10. Bermuda a. Yes, there is an arbitrage opportunity. An investor who purchased 1% of the equity of Debt Zero (DZ) would pay: 0.01 (3.6 million $86) = $3.096 million This investor's dividend
FM212/FM492 Principles of Finance Problem Set Solutions
Class 3 7. Little Oil a. A t = 0 each share is worth $20. This value is based on the expected stream of dividends: $1 at t = 1, and increasing by 5% in each subsequent year. Thus, we can find the app
FM212/FM492 Principles of Finance Problem Set Solutions
Class 5 13. Markum a. WACC = (1 / 1.4)(11.3%) + (.4 / 1.4)(5%)(1 .35) = 9% VL = 0.75/(9%-4%)=$15 million NPV = -10 + 15 = $5 million b. Debt-to-Value ratio is (0.4) / (1.4) = 28.57%. Therefore Debt i
AC100 TEACHING AND LEARNING SUPPORT
Christmas Vacation Essay Follow-Up
Instead of suggested solution notes to the Christmas Vacation Essay, we provide
you with samples of real student essays. All model essays have been awarded
an A grade (although these a
THE SHOCKING DEMISE OF MR. THORNDIKE
After the corpse was removed, police inspectors came to dust the bedroom for
fingerprints. Morse knew they would find nothing. He walked down the marble
staircase of Rupert Thorndikes mansion and into the paneled libra
FM212/FM492 Principles of Finance MT Problem Sets
Class 9 25. You have estimated spot rates as follows: Year 1 2 3 4 5 Spot Rate 0.25% 0.50% 0.75% 1.00% 1.25% a. What are the forward rates for each period? b. Calculate the PVs of the following government
Class 4 10. In Bermuda there are no corporate income taxes. Consider two Bermuda firms with perfectly correlated earnings. The first is Debt Galore and the second is Debt Zero. Each company is expected to earn $35 million (before interest) in perpetuity.
EC210.
MACROECONOMIC
PRINCIPLES
Week 0: Introduction
Professor Ricardo Reis
London School of Economics
Lent term 2016
1
OUR MEETINGS
The lectures:
Monday and Wednesday, 9:00-10:00, Peacock theatre
We meet weeks 1-5 and 7-11. Important: no lectures
on we
EC 210 Macroeconomic Principles (Part II)
Lent term, 2016
London School of Economics and Political Science
Professor Ricardo Reis
LECTURES
Instructor: Ricardo Reis
e-mail: r.a.reis@lse.ac.uk
Meetings: MW 9:00-10:00, Peacock
O.H.: W 10:00-12:00, 32L.1.27
C
C. (FIRST ORDER) PREDICATE LOGIC
Cl INTRODUCTION: THE NEED FOR A MORE POWERFUL SYSTEM OF
LOGIC
Truth-functional logic is strong enough, as we have seen, to capture a wide
range of intuitively valid inferences - and also, of course, to decide
validity or i
PH 101 LOGICExercises 02
A. Formalise the following sentences in the language of truth functional logic (indicate explicitly
which symbols, p, q, r . stand for which atomic sentences) and construct truth tables for them. (Take
either/or in the inclusive s
NOTES FOR INTRODUCTION TO LOGIC
BY JOHN WORRALL
CONTENTS:
SECTION A: Truth-Functional Logic
SECTION B: First Order Predicate Logic
A. TRUTH-FUNCTIONAL LOGIC
Al INTRODUCTION: Logic is about reasoning or arguing
'OK, Mr. Press Secretary, give me some answer
A3 (k) Truth-functional Equivalence and Interdefinability
We now know how to do everything in truth functional logic that we need to:
decide on validity/invalidity of an inference expressed in that logic; on whether a
particular compound sentence of the l
AC211 Managerial Accounting
Class 2 (Week 3) MT
Plastik
Dr David Twardowski
d.twardowski@lse.ac.uk
Question 1
Assume that the demand for dolls is 800,000 units, and the special order has
to be either accepted in full or rejected. Should Plastik accept the
Ph 101 LOGIC Exercises 03.
A. Formalise the following compound sentences, indicating exactly which symbols stand for which
atomic sentences and decide whether each sentence is either (a) a tautology, (b) a contingent
sentence or (c) a contradiction:
1. Ei
Logic Proofs
I suppose it will be helpful to have a look at today's proof again, especially with regards to the general
structure of how to proof an "iff" - condition. So here you go again:
To proof: a is independent of A iff both AUcfw_a and AUcfw_a are
SECTION B: TRUTH FUNCTIONAL LOGIC AND INFORMAL REASONING
At the beginning of the course I said that we would be studying the way that we reason both
in systematic disciplines like science, social science or mathematics and in ordinary argument
and reasoni
Addendum to PH101 Notes:
Using the Semantic Tree Method to decide whether a single sentence is (a) a contradiction,
(b) a tautology or (c) a contingent sentence
1. Contradictions The semantic tree method searches systematically for an assignment of
truth
AC211 Managerial Accoun1ng
Class 7 (Week 8) MT
HTC
Lukas Lhlein
Department of Accoun6ng
l.loehlein@lse.ac.uk
Essay guidelines
Answer the specic ques6on. Please make sure you understand what the ques6on of
Investment Banking Questions
Behavioral Interview
Industry:
Why investment banking/sales and trading?
What do investment banking do?
What do you think you will be doing on a day-to-day basis as an analyst?
Why [company name]?
What do you know about our fi
Behavioral Interview Guide
Preparation for Finance Interviews
Second Edition
Copyright 2009 by WallStreetOasis.com. All rights reserved.
All information in this guide is subject to change without notice. WallStreetOasis.com makes no
claims as to the accur
Lecture 6: 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 Lessons of Market Efficiency
Based on Chapter 13 in BMA
FM
Lecture 4: 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
Based on Chapter 7 in BMA
FM212
Principles of Corporate Fi
Lecture 5: Portfolio Theory
Portfolio Theory and Asset Pricing
Equilibrium
Markowitz Portfolio Theory
Mean Variance Optimization
Role of the CAPM
Evidence regarding CAPM
Some Alternative Theories to CAPM
Based on Chapter 8 in BMA
FM212
Principles of
Lecture 3: Value of Bonds and Stocks
Value of Bonds and Common Stocks
Using PV Formulas to Value Bonds
How Common Stocks are Traded
How Common Stocks are Valued
Estimating the Cost of Equity Capital
Stock Prices and EPS
Based on Chapters 3.1 and 4 in
Lecture 7: Put and Call Options
Put and Call Options
Calls, Puts and Shares
Financial Alchemy with Options
What Determines Option Value
Based on Chapter 20 in BMA
FM212
Principles of Corporate Finance
Terminology
Derivatives: Any financial instrument
w
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 Futures Pricing
Differences between Forwards and Futures
B
Lecture 9: 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
Explaining the Term Structure
Based on Chapter 3.2-3.4 in BMA
F
The CAPM: mathematics
Principles of Finance
Mean-variance optimization maths: setup
First were going to redo our mean-variance analysis using
mathematics
Assume
N risky assets and 1 risk-free asset
Risk-free rate is "
The N risky assets returns have co
FM212 MT2016 Problem Set Solutions
Class 6
16. CAPM
Expected Return
20
15
10
5
0
0
0.5
1
1.5
2
Beta
a.
b. Market risk premium = r m r f = 0.12 0.04 = 0.08 = 8.0%.
c. Use the security market line:
r = r f + (r m r f )
r = 0.04 + [1.5 (0.12 0.04)] = 0.16 =
FM212 MT2016 Problem Set Solutions
Class 5
13.
a. Variance measures the total risk of a security and is a measure of stand-alone risk. Total
risk has both unique risk and market risk. In a well-diversified portfolio, unique risks tend
to cancel each other
FM212 MT2016 Problem Set Solutions
Class 7
19.
a. No contradiction with market efficiency: taxpaying investors must be indifferent between
both kinds of bond, since theyre equally risky.
b. Strong form.
c. In an efficient market, predictable increases in
FM212 MT2015 Problem Set Solutions
Hand in Problem Set 1
The relevant cash flows for equity valuation are dividends per share:
Time
ROE
EPS
DIV
BE
-2
-1
0
1
2
3
4
0
14.08
0.25
3.52
0
17.60
0.25
4.40
0
22.00
0.25
5.50
0
27.50
0.25
6.88
0
34.38
0.25
8.59
0