Mr. FerTipton,
To start of this letter I would first like to thank you for giving me this big opportunity to prove my
ability of investing with your provided funds I am proud to say that I was able to invest your funds and
return your money back to your w
Risk Management and Insurance Review for 1st Exam
1) Direct vs. Indirect loss - Direct Losses are the immediate, or first, result of an insured peril. Indirect
losses are secondary result of an insured peril. For example, if fire destroys a home, the loss
Chapter 1 Vocab
Investment- Commitment of current resources in the expectation of deriving greater resources in the
future.
Real Assets- Assets used to produce goods and services.
Financial Assets- Claims on real assets or the income generated by them.
Fi
Risk Management & Insurance Extra Credit - Vicarious Liability in respect to Iowa State
University Professor Steven Leath
Logan Hein (668113) -12/8/2016
In this particular case the Iowa State president Steven Leath put Iowa State University in
a very toug
Optimal Risky Portfolio
Optimal Risky Portfolios
Portfolio of Two Risky Assets
Suppose you hold a proportion w in asset A
and (1-w) in asset B
The portfolio expected return and risk is given
by
E(RP ) = wE(RA ) + (1 w) E (RB )
p 2 = w2 A 2 + (1 w) 2 B 2
Holding Period Return
Return, Risk, and Risk
Aversion
Return =
Ending Price - Beginning Price + Intermediate Income
Beginning Price
Rt +1 =
An Example
You bought IBM stock at $40 last month. The
price of IBM stock is $45 today. IBM paid $1
dividend yester
Valuation
Equity Analysis I: Valuation
Models
Why Is It Important?
Valuation is one of the most important steps
in investments and portfolio management
To get good return on your investment, you
need to buy _ securities and sell
_ securities
It is therefo
Random Variable
Probability Distribution
Each possible outcome is associated with a
probability
A random variable is represented by its
probability distribution, i.e. the set or list of all
possible values of the random variable, with
their associated pro
Basic Formulas
Time Value of Money
Basic Formulas
FV t = PV t (1 + r )
t
Simple Qualitative Results
FV t = PV t (1 + r )
t
The future value is higher than the present
value if r > 0.
The present value is lower the greater the t is.
FV t
PV t =
(1 + r )t
S
Valuation
Equity Analysis II: Relative
Valuation Models
Valuation Models
Absolute valuation models
Relative valuation models
Price to Earnings
P/E ratio = Price per share/Earnings per
share
Two variations
trailing P/E
leading P/E
Valuation is the estimati
Why Performance Evaluation?
Portfolio Performance
Evaluation
What is important?
Performance evaluation requires historical
performance data
If there is only one piece of information youd
like to know about the portfolio, what is it?
Sources of Abnormal
Pe
Expected Return
Capital Asset Pricing
Model (CAPM)
What should be ABCs share
price?
ABC Inc. is expected to pay a liquidating (i.e.,
terminal) dividend of $112 per share one year
from today.
The required risk premium for the stock is
7%.
The risk free rat
Portfolio Construction
Capital Allocation
Capital Allocation and Security
Selection
Capital allocation decision is concerned with
Security selection decision is concerned with
Capital Allocation
In making the capital allocation decision, I
assume that you
Financial Assets
Financial Markets And
Financial Instruments - Part I
Real assets are _.
Financial assets _.
What is a Securities Market?
Primary and Secondary Markets
A securities market is a place where
_.
Organized exchanges
The primary market for secu
Market Efficiency
The Efficient Market
Hypothesis
Is Market Efficient?
If not efficient
mispriced securities
arbitrage opportunity
efficient
But information is not always publicly
available
Mispricing may not always be arbitraged
away.
The real question i
Overview of Term Structure
of Interest Rates
Relationship between yield to maturity and
maturity
Information on expected future short term
rates can be implied from yield curve
Three major theories are proposed to explain
the observed yield curve
Bond Val
What is a bond?
Bond Valuation I
Coupon Rate and Current Yield
Bond Valuation
Important characteristics of a bond:
Face Value ($ F)
Coupon ($ C)
Maturity (t periods)
Required rate (r )
Bond is an I.O.U.
Bond is a borrowing agreement
Bond issuers borrow mo
What is the intrinsic value of a
stock?
Behavioral Finance
The Psychology of Finance
Behavioral Finance
Behavioral Finance deals with the influence
of psychology on various aspects of financial
markets, including the behavior of individual
and institution
1. Which of the following statements are true or false?
(1) There is a high correlation between the standard of living and the quality of life
(2) Defining your consumption means planning how you spend your money
(3) Setting financial goals is not really
Directions: Please answer the following 40 questions designed to test your knowledge
of insurance decision making, investing in stocks, bonds and mutual funds, retirement and estate
planning. Each question is worth 2.5 points. Choose the best possible ans
Financial Planning
Exam II
Sample Exam 2014
True/False
Indicate whether the sentence or statement is true or false.
_
1. Some of the issues that the Affordable Health Care Act are attempting to address are: (1) the rising cost of
health care in the US, (2
1. The amount of money we set aside for future consumption will be determined by:(a) our
level of current wealth (b) how much we currently earn and spend (c) the number of college
degrees we have (d) the current needs and wants of our family (e) the cost
Finance 3130
2012
Corporate Finiance Sample Final Exam
Spring
True/False
Indicate whether the statement is true or falsewith A for true and B for false.
_
1. Interest paid by a corporation is a tax deduction for the paying corporation, but dividends paid
Corporate Finance
Sample
Exam 2A
Dr. A. Frank Thompson
True/False
Indicate whether the statement is true or false.
_
1. The market value of any real or financial asset, including stocks, bonds, CDs, coins, stamps, or art work
purchased in hope of selling
Risk Management and Insurance
Finance 3050
Sample Final Exam
Dr. A. F. Thompson
Directions: Please answer the following questions designed to test your knowledge of the
fundamentals of risk and insurance, risk management principles, basic insurance contra
Corporation Finance
Spring 2012
Sample Exam 2B
True/False
Indicate whether the statement is true or false.
_
1. The total return on a share of stock refers to the dividend yield less any commissions paid when the stock is
purchased and sold.
_
2. Accordin
Risk Management and Insurance
Dr. A. Frank Thompson
Sample Exam 2
Directions: Please answer the following questions designed to test your knowledge of risk
management and insurance concepts, fundamentals of life insurance, types of life insurance and
annu
Sample Investment Guidelines for the Individual Investor
1. View the purchase of a companys stock from the perspective of ownership in a
business . You should seek to buy only those companies where there is an
established record of earning profits. In gen