August 2014
Final Examination
Finance 1
MGCR 341
August 20, 6:00PM-9:00PM
EXAM: VERSION A
SOLUTIONS
Examiner:
Vadim di Pietro
Student Name:
Vadim di Pietro
McGill ID:
INSTRUCTIONS:
a) This is a CLOSED BOOK and CLOSED NOTES examination.
b) The exam is 180

August 2013
Final Examination
Finance 1
MGCR 341
August 21, 6:00PM-9:00PM
EXAM: VERSION A: SOLUTIONS
Examiner:
Vadim di Pietro
Student Name:
McGill ID:
INSTRUCTIONS:
a) This is a CLOSED BOOK and CLOSED NOTES examination.
b) The exam is 180 minutes in leng

MGCR 341: Finance 1
Fall 2013
Vadim di Pietro
Midterm: Version A: Solutions
Student Last Name:_
Student First Name:_
Student Number:_
Friday October 11th, 9:00am to 11:00am
Do not turn past this page until the exam has begun.
Time: The exam is 120 minutes

MGCR 341: Finance 1
Fall 2013
Vadim di Pietro
Assignment 3
The assignment is due by 6pm on Friday December 6th.
Please submit a hard copy of the assignment under my office door (room 224) any time
before then. I will only accept emailed assignments if you

MGCR 341: Finance 1
Fall 2013
Vadim di Pietro
Assignment 1
The assignment is due in class on Thursday October 3rd.
Please submit a hard copy of the assignment. I will only accept emailed assignments
if you have a valid reason for not being able to make it

Lecture13:Outline
Topic4:PortfolioTheory(Chapters10and11)
Themarketportfolio
CAPM
Beta
TheMarketPortfolio
The Market Portfolio is the portfolio of all risky
securities held in proportion to their market value. The
return on the market is:
N
rm vi ri

Lecture14:Outline
Topic4:PortfolioTheory(Chap10and11)
Singleindexmodelanddiversification
Topic5:Corporatebonds(Chap8)
YTMrevisited
Defaultprobabilityandrecoveryrates
Creditspreads
Single Index Model
Assumestockisreturns,ri,aredrivenbyasingle
factorm

Lecture3:Outline
Time value of money continued (Chapters 3, 4, 5)
Annuities + Perpetuities
Interest rates: periods, compounding, EAR
SimpleAnnuity
C
C
C
C
PV
.
1 r (1 r) 2 (1 r)3
(1 r) n
n
C
C
1
1
t
(1 r) n
r
t (1 r)
1
A simple or constant annu

Lecture8:Outline
Topic3:BondPricingcontinued(Chapter8)
YTMrevisited
Discountfactors
Arbitrage
Shortselling
YTM with non-flat yield curve
Recall: Given risk free rates for each maturity, one can
price bonds by discounting the bonds future cash flows
at m

2) (8 points, 15 minutes) You are given the following information: r0,5 = 5%, r0,2 = 3%, r0,3 = 4%, f10,20 =
2%. The table below describes a number of contracts being offered by an investment bank:
Every $1 invested at
gives you back
at
t=5
August 2011
Fi

April 2012
Final Examination
Finance 1
MGCR 341
APRIL 19, 9AM-12PM
EXAM: VERSION A: Solutions
Examiner:
Vadim di Pietro
Student Name:
McGill ID:
INSTRUCTIONS:
a) This is a CLOSED BOOK and CLOSED NOTES examination.
b) The exam is 180 minutes in length.
c)

August 2012
Final Examination
Finance 1
MGCR 341
August 22, 6:00PM-9:00PM
EXAM: VERSION A: Solutions
Examiner:
Vadim di Pietro
Student Name:
McGill ID:
INSTRUCTIONS:
a) This is a CLOSED BOOK and CLOSED NOTES examination.
b) The exam is 180 minutes in leng

April 2013
Final Examination
Finance 1
MGCR 341
April 19, 9:00AM-12:00PM
EXAM: Solutions
Examiner:
Vadim di Pietro
Student Name:
McGill ID:
INSTRUCTIONS:
a) This is a CLOSED BOOK and CLOSED NOTES examination.
b) The exam is 180 minutes in length.
c)
SHOW

Overview of Corporate Finance
and the Financial Environment
Corporate Finance
Objective of the Firm
Determinants of Stock Pricing
Agency Relationship
The Financial Perspective of the Financial
Statements
The Financial Environment
Financial Markets and

Cost of Capital
1
1. Cost of Capital of the projectDefinition
Weighted average costs of financing
It provides the minimum acceptable rate of
return (hurdle rate)
2
Decision Criteria
IRR
IRR Cost of Capital (c.o.c)
NPV
FCFt
NPV I O t
(1 c.o.c ) t
Higher

MGCR 341: Finance 1
Vadim di Pietro
Assignment 5: Solutions
1) Topic: Portfolio returns and short sales
You have $50,000 of wealth. After much research you conclude that shares of Apple are
overvalued relative to shares of Microsoft. You thus decide to sh

MGCR 341: Finance 1
Vadim di Pietro
Assignment 4: Solutions
1) Topic: Bond Pricing Modified Duration
Suppose the yield curve is flat at 3%. You expect the curve to steepen but have no view on the
level of rates. You have $6,000, and can go long or short 3

MGCR 341: Finance 1
Vadim di Pietro
Assignment 8: Solutions
1) Topic: Capital Budgeting
Today is t = 0. Suppose that a steel company has an existing blast furnace that will last for
another 20 years. The company is evaluating a proposal to refurbish the e

MGCR 341: Finance 1
Winter 2014
Vadim di Pietro
Assignment 3: Solutions
Topic: Portfolio Theory
1) You are given the following information:
a. Stocks A, B, and C have standard deviations of 50%, 60%, and 70%, respectively
b. Stocks A and B have expected r

April 2013
Final Examination
1) (4 points, 5 minutes) A bank is offering a 6% APR with monthly compounding on deposits. You
deposit $100 in the bank at t = 0, and then make another deposit of $200 at month t = 8. You then
let the money stay in the bank un

2) (8 points, 15 minutes) You are given the following information: r0,5 = 5%, r0,2 = 3%, r0,3 = 4%, f10,20 =
2%. The table below describes a number of contracts being offered by an investment bank:
Every $1 invested at
gives you back
at
t=5
August 2011
Fi

PRACTICE QUESTIONS FOR THE MIDTERM
Q1
A given rate is quoted as 9% APR, but has an EAR of 9.3807%. What is the rate of
compounding during the year?
a. Biannually
b. Annually
c. Semiannually
d. Monthly
e. Continuously
0.09
1
12
Q2
12
1 0.093807
Mary has ju

Required Reading
Chapter 5, Interest Rates from J. Berk et al.,
Fundamentals of Corporate Finance, Second
Canadian Edition.
INTEREST RATES
Introduction to Finance (MGCR 341) Prof. de Motta
2
Introduction to Finance (MGCR 341) Prof. de Motta
Question
Effe

Required Reading
Chapter 4, Time Value of Money from J. Berk et al.,
Fundamentals of Corporate Finance, Second
Canadian Edition.
TIME VALUE OF MONEY
Introduction to Finance (MGCR 341) Prof. de Motta
2
Introduction to Finance (MGCR 341) Prof. de Motta
The

Required Reading
Chapter 3, The Valuation Principle: The Foundation
of Financial Decision Making from J. Berk et al.,
Fundamentals of Corporate Finance, Second
Canadian Edition.
The Valuation Principle
Recommended Reading
Chapter 1, Corporate Finance an