Finance Mid Term-I’Ve Made Notes

FINC 5000, Summer 2015Mid-Term Exam, Part BMidterm Exam Part B, ProblemsDirections: You may complete the exam in Excel or in Word. If you choose to complete the exam in Excel, open the Excel program and create a newspreadsheet named mid-term exam (your last name). Then answer the following questions onthe spreadsheet. You may put each problem on a separate tab in the spreadsheet if you like. Save the file when you are finished, then submit the exam on the course website just as youwould a normal homework assignment. If you choose to complete the exam in Word, open the Word program and create a newdocument named mid-term exam (your last name). Then answer the following questions on thedocument. Be sure to show your calculations! Save the file when you are finished, thensubmit the exam on the course website just as you would a normal homework assignment. Reminders: In Excel, use formulas in the spreadsheet to solve the problems so your instructor can see howyou arrived at your answers. If your instructor cannot determine how an answer wascalculated, no credit will be given for that answer. If a question calls for a text answer, such asa few sentences or a short paragraph, create a text box on the spreadsheet and enter your text inthe box. In Word, be sure to show clearly how you arrived at your answers by entering thecalculations as text. If your instructor cannot determine how an answer was calculated, nocredit will be given for that answer. Be sure to complete the exam by the deadline posted for it. Late submissions without goodreason will be assessed a penalty. Be sure to put your name on the spreadsheet or in the Word document. You must complete the exam by yourself, without assistance from anyone else. Copying andpasting from another persons spreadsheet or Word document or from the Internet is notallowed. Also, you must not give assistance to anyone else. That means you may not sendyour files, or parts of your files to anyone else and you may not receive files, or parts of filesfrom anyone else. Ask your instructor if you have any questions. Exam problems begin on the next page. There are seven questions worth a total of 40points. —————————–Page 1FINC 5000, Summer 2015Mid-Term Exam, Part BQuestion 1: (Financial Statement Analysis) 10 pointsConsider the following sets of financial statements and answer the questions that follow: Page 2FINC 5000, Summer 2015Mid-Term Exam, Part Ba. Which firm is the most liquid? Why? (Justify your answer with at least two ratios). b. Which firm is the most profitable? Why? (Justify your answer with at least two ratios). c. Construct a Du Pont equation (use the extended, or modified version shown in the Week 1,chapters 2 &amp, 3 lesson notes) for each firm and comment on the sources of each firms ROEas revealed by the equation. Question 2: (Time Value of Money Monthly Loan Payments) 5 pointsBest Buy has a 65 4K Ultra HD TV on sale for $1,999. 99. If you could borrow that amountfrom First National Bank of St Louis at 4% for 1 year, what would be your monthly loanpayments?Question 3: (Time Value of Money Present Value) 4 pointsYou have figured out that you will need $800,000 to finance your childs college education whenshe turns 18, which will be 16 years from now, so you decide to invest in zero-coupon bonds,which will mature in 16 years and will pay off $800,000 at maturity. How much would you haveto invest in zero-coupon bonds today to reach your goal, assuming the going rate on such bondsis currently 3. 5% per year?Question 4: (Risk &amp, Return) 4 pointsYou hold a portfolio of stocks consisting of the following: StockCaterpillarCitiCorpWendysBoeingBeta0. 60. 81. 01. 2Total: Current Value$20,000$21,000$22,000$27,000$90,000a. What is the beta of the portfolio?b. You have decided to sell Boeing for $27,000 and to use the proceeds to buy $27,000 of Nikestock with a beta of 1. 4. After the transaction is complete, what will be the new beta of theportfolio? (Disregard any commissions on the buy and sell transactions. )Page 3FINC 5000, Summer 2015Mid-Term Exam, Part BQuestion 5: (Risk &amp, Return) 3 pointsa. Define the Capital Asset Pricing Model. (DOES NOT NEED TO BE DONE)b. Explain what a stock’s &quot,beta&quot, is. (DOES NOT NEED TO BE DONE)c. If the risk-free rate is 1% and the expected rate of return on the stock market is 9%, what is therequired rate of return per the CAPM for a stock that has a beta of 1. 3?Question 6: (Bond valuation) 8 pointsa. Curley’s Company’s bonds have 10 years remaining to maturity. Interest is paid annually, thebonds have a $1,000 par value, and the coupon interest rate is 4%. The bonds have a yield tomaturity (YTM) of 5%. Given these conditions, what should be the current price of these bonds?b. Larry’s Company’s bonds have 8 years remaining to maturity. Interest is paid annually, thebonds have a $1,000 par value, and the coupon interest rate is 4%. The bonds have a currentmarket price of $890. Given these conditions, what should be the yield to maturity (YTM) ofthese bonds?Question 7: (Stock Valuation) 6 Pointsa. Define the Efficient Markets Hypothesis. (DOES NOT NEED TO BE DONE)b. Financial theorists generally define three forms of market efficiency: the weak-form, thesemi-strong-form, and the strong-form. Explain these three forms. (DOES NOT NEED TO BEDONE)—————————–End of exam

Originally posted 2018-07-14 00:53:17. Republished by Blog Post Promoter