ECON 422
Spring 2016
Youngjin Yun
University of Maryland
Problem Set 5
Due Tuesday May 10, 9:30am. Show your work step by step, answer concisely and write clearly.
You may work in groups, but each student must submit her own answers. In the case of group

TUTORIAL FOR CHAPTER 5:
THE RISK AND TERM STRUCTURE OF INTEREST RATES
End of chapter questions
1.
Which should have the higher risk premium on its interest rates, a corporate bond with a Moodys Baa rating or a
corporate bond with a C rating? Why?
2.
Risk

Chapter 14 Bonds and Long-Term Notes
True/False Questions
1. The specific provisions of a bond issue are described in a document called a bond indenture.
Answer: True Learning Objective: 1
Level of Learning: 1
2. Bonds will sell for a premium when the mar

Set 5
1. For the Hawkins Company, the monthly percentages of all shipments that were received on
time over the past 12 months are 80, 82, 84, 83, 83, 84, 85, 84, 82, 83, 84, and 83.
a. Graph this time series. Does a linear trend appear?
b. Compare a three

Chapter 10 Operational Assets: Acquisition and Disposition
True/False Questions
1. Operational assets is a term used to describe assets created by the normal operation of the
business, including inventories and receivables.
Answer: False Learning Objectiv

Chapter 18 Shareholders' Equity
True/False Questions
1. Paid-in capital must consist solely of amounts invested by shareholders.
Answer: False
Learning Objective: 6
Level of Learning: 1
2. Stock designated as preferred usually has preferential rights over

Chapter 8 Inventories Measurement
True/False Questions
1. Under FIFO, LIFO, and average cost, the cost flow of a product does not depend on the
physical flow.
Answer: True
Learning Objective: 4 Level of Learning: 1
2. Physical counts of inventory are not

Chapter 19 Share-Based Compensation and Earnings per Share
True/False Questions
1. The current FASB standard requires using intrinsic value accounting for employee stock
options.
Answer: False
Learning Objective: 2
Level of Learning: 1
2. Current year sto

Chapter 11 Operational Assets: Utilization and Impairment
True/False Questions
1. The three factors in cost allocation of a depreciable asset are service life, the allocation base,
and the allocation method.
Answer: True Learning Objective: 1
Level of Lea

Chapter 15 Leases
True/False Questions
1. At the inception of a lease agreement, the company's debt to equity ratio and rate of return on
assets are both affected whether the lease is classified as a capital lease or as an operating
lease.
Answer: False
L

Chapter 12 Investments
True/False Questions
1. Securities classified as held to maturity could be reported as either current or long-term on a
classified balance sheet, depending upon their maturity dates.
Answer: True
Learning Objective: 1
Level of Learn

Homework 11 Speculating by Buying a Put
In addition to speculation through selling Puts and Calls, you can also
speculate through buying Puts and Calls.
A speculator who anticipates stable to increasing prices will sell a Put or buy a
Call.
A speculator w

AREC 435 Homework 6: Pre-Harvest Hedging
Using the futures price and basis data below, calculate the effective selling price for the
following three pre-harvest corn hedges. Enter your answer on Pre-Harvest Grain
Hedging Worksheets. Fill in all boxes.
On

Lecture 2
Review of Statistics
In this lecture, we will review important statistical concepts which are
necessary to understand following lectures about regression.
2.1
HT
we cannot
get 2.5 or
3.6
Random variables
A random variable is a variable whose va

ECON 422
Econometrics I
Youngjin Yun
University of Maryland
Spring 2016
Lecture Outline
1. Introduction
2. Review of Statistics
3. Simple Linear Regression
4. Multiple Linear Regression: Estimation
5. Multiple Linear Regression: Inference
6. OLS Asymtotic

Lecture 5
Multiple Linear Regression
- Inference
5.1
Normality
Recall the Gauss-Markov Assumptions: MLR.1-5
MLR.1 Linear in Parameters
MRL.2 Random Sampling: ui i.i.d
delta beita1=+/-1 X2=+/-X1
MLR.3 No Perfect Collinearity
MLR.4 Zero Conditional Mean: E(

Lecture 3
Simple Linear Regression
3.1
Definition
Simple linear regression : A model that will explain y in terms of x
yi = 0 + 1 xi + ui
yi : dependent variable
xi : independent variable
ui : the error term (unobserved)
0 : intercept parameter (unobs

Size of food marketing sector
Farm
50
45
40
35
30
25
20
15
10
5
0
farm value as % of retail cost for market basket of foods, 1952-1997
Value of Food Consumed as Percentage of GDP 1869 to 2011
30
25
20
15
10
5
0
1865
1885
1905
1925
value of food consumed

ECON 422 Introductory Econometrics I
Problem Set 2: Solutions
1. The following table contains data on the number of children (kids) and the years of schooling (educ)
for a sample of six married women. We are interested in the effect of a mothers education

ECON 422 Introductory Econometrics I
Problem Set 3: Solutions
1. Short questions
(a)
Using the algebraic property 3, you can get 3.34 as the average college GPA in the sample.
(b)
This statement is FALSE.
Multiple regression analysis is valid as long a

ECON 422 Problem Set 1 Solutions
Spring 2016
1.
(i) Ideally, we could randomly assign students to classes of different sizes. That is, each student
is assigned a different class size without regard to any student characteristics such as ability
and family

Lecture 4
Multiple Linear Regression
- Estimation
4.1
Motivation
Simple Linear Regression
y = 0 + 1 x + u
Primary drawback: very difficult to draw ceteris paribus conclusions about how x affects y:
The key assumption, SLR.4 (zero conditional mean) all o

Tutorial chapter 1
1. What is economics?
2. Define macroeconomics and microeconomics.
3. Name four factors of production.
4. What is tradeoff?
5. What is opportunity cost?
6. What is economic model?
7. What is positive economics and what is normative econ

TUTORIAL FOR CHAPTER 3:
WHAT DO INTEREST RATES MEAN AND WHAT IS THEIR ROLE IN VALUATION?
Questions:
1. There are 4 types of credit instruments. Identify their major features.
2. How do you understand the concept of Present Value (PV) and how is it applied

TUTORIAL FOR CHAPTER 9: MONEY MARKET
Problem 1.
You have to choose between the investing in two 1000$ face value discount Treasury bills: one is a 91-day
with the current bid-ask prices 970$-985$; another is 182-day T bill that is offered for 950$. What a

Chapter 9 Inventories: Additional Issues
True/False Questions 1. In determining lower-of-cost-or-market, market is the expected selling price under normal operations. Answer: False Learning Objective: 1 Level of Learning: 1
2. Net realizable value is sell

Chapter 7 Cash and Receivables
True/False Questions 1. In a good system of internal control, the person who initiates a transaction should be allowed to effectively control the processing of the transaction through its final inclusion in the accounting re

Chapter 6 Time Value of Money Concepts
True/False Questions 1. Compound interest includes interest earned on interest. Answer: True Learning Objective: 1 Level of Learning: 1
2. When interest is compounded, the contract rate of interest exceeds the effect