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MFIN 1151 Midterm Exam: Fall 2021 Page 1 MFIN1151: Investments Fall 2021 Midterm Exam Prof. David Solomon INSTRUCTIONS You have one hour and fifteen minutes to complete this exam. This exam is closed book and closed notes, except for one sheet of 8.5x11 notes (both sides). Calculators are allowed. There are 11 questions
for a total of 180 points
This exam is taken under the Academic Integrity Policy, which stipulates: Cheating is the fraudulent or dishonest presentation of work. Cheating includes but is not limited to: -the use or attempted use of unauthorized aids in examinations or other academic exercises submitted for evaluation; -copying from another student's work; -actions that destroy or alter the work of another student; -unauthorized cooperation in completing assignments or during an examination; -dishonesty in requests for make-up exams, for extensions of deadlines for submitting papers, and in any other matter relating to a course.
Please sign your name below to acknowledge and accept the Academic Integrity Policy. SIGNATURE: (Please sign) NAME: (Please print) STUDENT ID:
MFIN 1151 Midterm Exam: Fall 2021 Page 2 1.
(30 points total) You are an investment manager, and can combine a risk-free T-Bill which earns 1% (which you can either buy or short) with a single
risky asset. You only care about the mean and variance of your portfolio. You can choose your single risky asset from two alternatives
Your current stock index has an expected return of 9% and a standard deviation of 24% You are considering switching to a bond index, with an expected return of 5% a) (15 points) What standard deviation of returns for the bond index would make you switch, and why?
MFIN 1151 Midterm Exam: Fall 2021 Page 3 b)
(15 points) Suppose that the bond portfolio has a standard deviation of 10%, with other parameters the same as before. You are currently invested 100% in the stock portfolio, as per the wishes of your client, Andropov. You are suggesting switching to the bond portfolio plus some position in the T-Bill. Andropov says “You know, I don’t really care a great deal about risk, I mostly just care about mean returns. Reducing risk from 24% to 10% doesn’t appeal to me much
, and the bond index has lower average returns. I’m fine with a standard deviation of 24%, so I don’t want to switch.”
Given this set of preferences, should the client switch? If so, explain why, and how those preferences can be satisfied. If not, explain why not.
MFIN 1151 Midterm Exam: Fall 2021 Page 4 2.
(20 points) Suppose your friend Chernenko is trading on Robinhood, and he sees a stock with a bid of $10 and an ask of $10.10. He buys 100 shares of the stock using a market order, and pays no commission to Robinhood. The stock rises in price to a bid of $10.50, and an ask of $10.60. He sells the 100 shares of the stock using a market order. Chernenko explains to you “I don’t pay any fees to Robinhood, and since the stock went up in price, my trades are free.” Do you agree? Please explain your reasoning
, and show the costs of the trade, if any. Hint: For purposes of comparison, you may consider the profits from the trade relative to the bid-ask midpoint prices.
MFIN 1151 Midterm Exam: Fall 2021 Page 5 3.
(20 points) You currently hold a portfolio that is 100% invested in US stocks, with an expected return of 12% and a standard deviation of 18%. The risk-free rate is 2%. You are considering investing some of your portfolio in French stocks, which have a standard deviation of 21%, and a correlation with the US of 0.4 For what expected return on French stocks will you want to take a short position in France if you want a higher Sharpe Ratio?
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ES-
December 31.
Nov. 1 Loaned $23,500 cash to Manny Lopez on a 12-month, 12% note.
t
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Accrued interest revenue on all notes receivable.
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20XI. CVC paid $15,000 cash and signed a five year, 10% note for the remaining $65,000 of the purchase price. The note
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Providing for Doubtful Accounts
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A couple needs $50,000 as a down payment for a home. If they invest the $35,000 they have at 8% compounded quarterly, how long will it take for the money to
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Main Street Bank has savings accounts that earn 0.8% interest per month. All deposits, interest payments, and account closures are processed on the first day of a month
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Assume a customer deposits the same amount of money, x, in dollars, each month. Write an expression that can be used to determine how much money would be in a savings account from Main
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Respond in the space provided.
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Luciana and Valerie are both opening savings accounts at Main Street Bank and will close their savings accounts at the end of their savings strategy Luciana's savings strategy is to deposit $200
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9-EZ Way has a market value equal to its book value. Currently, the firm has excess cash of
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Journalizing Installment Notes
On the first day of the fiscal year, a company issues $52,000, 11%, five-year installment notes that have annual payments of $14,070. The first note
payment consists of $5,720 of interest and $8,350 of principal repayment.
a. Journalize the entry to record the issuance of the installment notes. If an amount box does not require an entry, leave it blank.
b. Journalize the first annual note payment. If an amount box does not require an entry, leave it blank.
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Central Valley Construction (CVC) purchased $80,000 of sheet metal fabricating equipment from Buffalo Supply on January 1,
20X1. CVC paid $15,000 cash and signed a five-year, 10% note for the remaining $65,000 of the purchase price. The note
specifies that payments of $13,000 plus interest be made each year on the loan's anniversary date. CVC made the required January 1, 20X2,
payment but was unable to make the second payment on January 1, 20X3, because of a downturn in the construction industry. At this time,
CVC owed Buffalo Supply $52,000 plus $5,200 interest that had been accrued by both companies. Rather than write off the note and
repossess the equipment, Buffalo Supply agreed to restructure the loan as one payment of $50,000 on January 1, 20X5, to satisfy the
Page 9-40
restructured note.
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- If your answer is 41719.11 it's wrongarrow_forwardAuditing || fall20 Dashboard My courses ACCT4141_iram_fall20 WEEK 7: 25 OCTOBER - 31 OCTOBER Case study 2 Separate groups: 5 My Submissions Case 2 Title Start Date Due Date Post Date Marks Available Case study 2 - Case 2 27 Oct 2020 - 08:00 28 Oct 2020 - 06:00 28 Oct 2020 - 19:00 100 Summary: On Chapters 9, 10, and 11: The YuRaeKa charity was established in 1960. The charity’s aim is to provide support to children from disadvantaged backgrounds who wish to take part in sports such as tennis, badminton, squash, basketball and football. YuRaeKa has a detailed constitution[1] which explains how the charity’s income can be spent. The constitution also notes that administration expenditure cannot exceed 10% of income in any year. The charity’s income is derived wholly from voluntary donations. Sources of donations include: (i) Cash collected by volunteers asking the public for donations in shopping areas, (ii) Cheques sent to the charity’s head office, (iii) Donations…arrow_forwardsd subject-Accountingarrow_forward
- A Final Exam - MATH 1330 - Math b Details | bartleby E New tab A https://www.webassign.net/web/Student/Assignment-Responses/submit?dep=254878928tags=autosave#question4023958_1 Sign in 12. DETAILS HARMATHAP12 6.2.009. MYΝΟΤΕS What are the future value and the interest earned if $4000 is invested for 3 years at 8% compounded quarterly? (Round your answers to the nearest cent.) future value 24 interest earned %24arrow_forwardhttps://sfdr.owschools.com/owsoo/studentAssignment/index?eh=65534403 SSIGNMENTS Assignment - 1. Credit Scores and Loans Attempt 1 of 1 COURSES SECTION 3 OF 4 QUESTION 1 4 8 You get a personal loan of $5,000 with 12% simple interest too be paid over 30 months. What is your monthly payment? O $150.00 O $166.67 O $216.67 O $175.00 NEXT QUESTION O ASK FOR HELP TURN IT IN e to search Pause T H K B N M Alt Ctarrow_forward17.39 .. 90 PROBLEMS OF SEMESTER FINAL TEST 2021 Word es Mailings Review View Help O Tell me what you want to do Aa - AaBbCeDd AaBbCcl AaBbCcDe AaBbCcDe AaBt Heading 2 Heading 3 T Normal I No Spac. Headin Paragraph Styles 4.5.6 7 8.. 9. • 10. 11 12. 13. 14. 15.I Thursday : January 21, 2021 --- 80 Minutes 1. In this section we examine three theories of investor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase. 2. In the working capital management, we know about cash conversion cycle model. For problem if average inventories are $3 million and sales are $11 million. If receivables are S 657.535 and sales are S 11 million. Then, if its cost of goods sold are $9 million per year and if its accounts payable average $ 657.535. What is the length of the cash conversion sicle? 3. The ELGRAJO Corporation has capital structure as follow…arrow_forward
- Return to Blackboard US Weygandt, Accounting Principles, 13th Edition, Custom WileyPLUS Course for Bronx Community College Help | System Announcements Exercise 9-12 a-b (Part Levei SubmiSSion) CES CALCULATOR PRINTER VERSION 4 ВАCK Oriole Supply Co. has the following transactions related to notes receivable during the last 2 months of 2020. The company does not make entries to accrue interest excer ES- December 31. Nov. 1 Loaned $23,500 cash to Manny Lopez on a 12-month, 12% note. t Sold goods to Ralph Kremer, Inc., receiving a $61,200, 90-day, 10% note. Dec. 11 16 Received a $97,200, 180 day, 8% note in exchange for Joe Fernetti's outstanding accounts receivable. 31 Accrued interest revenue on all notes receivable. (a) Your answer is correct. Journalize the transactions for Oriole Supply Co. (Ignore entries for cost of goods sold.) (Credit account titles are automatically indented when amount is ente indent manually. Use 360 days for calculation. Round answers to 0 decimal places, e.g.…arrow_forwardGeneral Accounting I 2020-2021 Fall Term Final Exam (page 18 of 25)-Google Chrome a.tr/mod/quiz/attempt.php?attempt=361811&cmid=180187&page=17 MSKÜ-LMS 1807 ŞB: 1 ÖRGÜN General Accounting I İktisadi ve Idari Bilimler Fakültesi İktisa 8 A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of $200 is granted on July 18. What amount is received as payment in full on July 247 Tanmadi O a. $3.332 izerinden tlenmiş O b. $3,600 oruyu etle OC $3.528 O d. $3,400 Önceki sayfaarrow_forwardO Odysseyware Ô https://sfdr.owschools.com/owsoo/studentAssignment/index?eh=65534403 San Felipe Der RIO CISD- IS JALYN GARCIA Odysseyware LEARN MESSAGE HELP SIGN OUT Assignment - 1. Credit Scores and Loans Attempt 1 of 1 ASSIGNMENTS COURSES SECTION 3 OF 4 QUESTION 6 OF 8 1 2 4 5 >> Match the option with the lowest monthly payment to highest monthly payment. $12,000 loan with 1% simple 1. lowest payment interest over 7 years $7,500 loan with 4% simple interest 2. second highest payment over 5 years $8,500 loan with 2% simple 3. third highest payment interest over 6 years $10,000 loan with 3% simple 4. fourth highest payment interest over 4 years 9:19 PM 后 ENG 2/4/2021 P Type here to search Rarrow_forward
- 10:04 Assignment Details ATG-110-20A01: Financial Accounting (Session II Summer 2021) 7474 unread replies.7575 replies. Please read and respond to TIF 12-2 on page 623. Review the rubric to ensure you receive full points for this discussion. Discussion Rubric- 25 points(1)_(3).docx *After you have posted your answers, please reply to three other students' posts. This discussion board was set up so that you will not be able to see others replies until you post your own. Search entries or author Filter replies by unreadUnread Collapse replies TIF 12-2 Issuing Stock 1. ETHICS Lou Hoskins and Shirley Crothers are organizing Red Lodge Metals Unlimited Inc. to undertake a high-risk gold mining venture in Canada. Lou and Shirley tentatively plan to request authorization for 400,000,000 shares of common stock to be sold to the general public. Lou and Shirley have decided to establish par of $0.03 per share in order to appeal to a wide variety of potential investors. Lou and Shirley believe…arrow_forwardSpring 2021 Final Exam(2) Saved to this PC - егences Mailings Review View Help AaBbCcD AaBbCcDc AaBbC AaBbCcC A aB 三。 I Normal T No Spac. Heading 1 Неading 2 Title Paragraph Styles 6-Dyson Manufacturing Company had the following financial statement results for last year. Net sales were $1.2 million with net income of $90,000. Total assets at year-end amounted to $900,000. a. Calculate Dyson's asset turnover ratio and its profit margin. b. What is Dyson's rate of return on assets. 7-Marriot Corporation has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 2 percentage point across the yield curve. What will be the change in price for each of the bonds? Does this tell us anything about the relationship between coupon rate and interest rate risk? Bond A: 10 years to maturity, 0 percent coupon, market interest rate is 10 percent. Bond B: 10 years to maturity, 10 percent coupon, market interest rate is 10…arrow_forwardвсе Google Chrome - D... My Learning Progre... N Northwestern Univ... Solution Manual Fo... Business Law Question 28 of 40 View Policies Show Attempt History < Current Attempt in Progress X Your answer is incorrect. 0/0.3 Your grandfather has agreed to deposit a certain amount of money each year into an account paying 7.90 percent annually to help you go to graduate school. Starting next year, and for the following four years, he plans to deposit $2,350, $8,600, $7,200, $6,600, and $12,150 into the account. How much will you have at the end of the five years? (Round answer to 2 decimal places, e.g. 15.25.) Future value at end of five years eTextbook and Media Save for Later Using multiple attempts will impact your score. 20% score reduction after attempt 2 Q Search 41719.11 GUND Attempts: 1 of 3 used Submit Answerarrow_forward
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