__________ lаw refers tо а trаditiоnal bоdy of unwritten legal precedents created through everyday practice and supported by court decisions during the Middle Ages in English society.
Finаl Exаm fоr Sectiоn 42 There аre 20 questiоns on this exam, each worth 5 points. Therefore, the maximum possible score is 100 points. To receive full credit, you must clearly show the steps leading to your answers. Whether right or wrong, answers submitted without supporting work or explanations will receive no credit. This rule applies to every question, including multiple-choice items. Answer Sheet Instructions Please utilize the following instructions to properly record and submit your Exam answers. 1. You must sign the integrity statement on the first page of the answer sheet. 2. Before submitting your answer sheet, please ensure you have renamed the file to be "[Your First and Last Name] - Final Exam Answer Sheet" 3. Here is the downloadable answer sheet: Final Exam Answer Sheet Question 1 Fernando Zapetero, who recently won $20,000 in the lottery, wants to buy a car in five years. Fernando estimates that the car will cost $32,210 at that time. His cash flows are displayed in Figure 4.7. What interest rate must he earn to be able to afford the car? Figure 4.7 Cash Flows for Purchase of Car: Question 2 Katharina Lewellen invested $1,000 at a continuously compounded rate of 10 percent for one year. What is the value of her wealth at the end of one year? Question 3 Your car recently broke down and it needs $2,000 in repairs. But today is your lucky day because you have just won a contest. The prize is either a new motorcycle with a MSRP of $15,000 or $10,000 in cash. You do not have a motorcycle license, nor do you plan on getting one. You estimate you could sell the motorcycle for $12,000. Which prize should you choose? Why? Question 4 Perpetuities M3 Pharmaceuticals is considering a drug project that costs $6.4 million today and is expected to generate end-of-year annual cash flows of $570,000 forever. At what discount rate would the company be indifferent between accepting or rejecting the project? Question 5 Stanley Jaffe and Sherry Lansing have purchased the rights to Corporate Finance: The Motion Picture. They will produce this major motion picture on either a small budget or a large budget. Here are the estimated cash flows: Due to high risk, a 25 percent discount rate is considered appropriate. Sherry wants to adopt the large budget because the NPV is higher. Stanley wants to adopt the small budget because the IRR is higher. How can Sherry justify the large budget to Stanley using the IRR approach? Question 6 Jessica has just graduated with her MBA. Rather than take the job she was offered at a prestigious investment bank—Baker, Bellingham, and Botts—she has decided to go into business for herself. She believes that her business will require an initial investment of $1 million. After that, it will generate a cash flow of $100,000 at the end of one year and this amount will grow by 4% per year thereafter. What is the IRR of this investment opportunity? Question 7 Orchid Biotech Company is evaluating several development projects for experimental drugs. Although the cash flows are difficult to forecast, the company has come up with the following estimates of the initial capital requirements and NPVs for the projects. Given a wide variety of staffing needs, the company has also estimated the number of research scientists required for each development project (all cost values are given in millions of dollars). Suppose that Orchid has a total capital budget of $60 million. How should it prioritize these projects? Question 8 The Alpha Corporation is considering to invest in a riskless project costing $100. The project receives $107 in one year and has no other cash flows. The discount rate on riskless investments is 2 percent. Should the project be accepted based on the NPV rule? Question 9 Suppose the real interest rate is 3% per year and the expected inflation rate is 8%. What is the expected nominal interest rate? Question 10 You invest $1 million at the beginning of 2028 in a stock-index fund. If the rate of return in 2028 is -40%, what rate of return in 2029 will be necessary for your portfolio to recover to its original value? Question 11 Investor holds $100 million in equities. The equity return (%) follows a normal distribution with the mean being zero and the standard deviation being 3.86. What is the VaR loss in $million at 95% confidence level? Note that the 5% point percentile of the standard normal distribution is -1.65. Question 12 If a portfolio had a return of 15%, the risk-free asset return was 5%, and the standard deviation of the portfolio's returns was 30%, what would be the Sharpe ratio? Question 13 A portfolio has an expected rate of return of 15% and standard deviation of 30%. T-bills offer a safe rate of return of 2%. Would an investor with risk-aversion parameter A=4 prefer to invest in T-bills or the risky portfolio? What if A=2? Question 14 Suppose that the universe of available risky securities consists of a large number of stocks, identically distributed with E(r) = 15%, σ = 60%, and a common correlation coefficient of ρ = .5. What is the systematic risk in this security universe? Question 15 The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows: Expected Return Standard Deviation A 10% 20% B 30% 60% T-bills 5% The correlation coefficient between funds A and B is -0.2 (note the negative sign in front of 0.2). Construct the optimal risky portfolio and provide its expected return and volatility. Question 16 Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets. E(Rp) = 12.00% Standard Deviation of P = 7.20% T-Bill rate = 3.60% Proportion of Complete Portfolio in P = 60% Proportion of Complete Portfolio in T-Bills = 40% Composition of P: Stock A 40.00% Stock B 25.00% Stock C 35.00% Total 100.00% What is the equation of Bo’s Capital Allocation Line? Expected Return = 7.2 + 3.6 * Standard Deviation Expected Return = 3.6 + 12.0 * Standard Deviation Expected Return = 0.2 + 1.167 * Standard Deviation Expected Return = 3.6 + 0.857 * Standard Deviation Expected Return = 3.6 + 1.167 * Standard Deviation Question 17 Data from the last 95 years for the broad U.S. equity market yield the following statistics: average excess return, 8.9%; standard deviation, 20.3%. To the extent that these averages approximated investor expectations for the period, what must have been the average coefficient of risk aversion? Question 18 Suppose that the risk premium on the market portfolio is estimated at 8% with a standard deviation of 22%. What is the risk premium on a portfolio invested 25% in Toyota and 75% in Ford if they have betas of 1.10 and 1.25, respectively? Question 19 Messi, Inc. has a beta of 0.6. Its stock price increased by 14% in 2024. Ronaldo, Inc. has a beta of 1.2 and its stock price increased by 9% in 2024. If the market return is expected to increase by 5% in 2025, which stock will you expect to have a higher return in 2025 per CAPM? Ronaldo, Inc. Messi, Inc. They should have the same expected return. Not enough information to determine this. Question 20 “In the CAPM world, the betas for all stocks must have gone up during risky market conditions like the financial crisis.” Does the above argument make sense? Why or why not? --- Good Luck! ---
Whаt meаsurement cаn be used in cоnjuctiоn with the biparietal diameter (BPD) tо give a “shape-corrected” BPD?