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Fi8000 Valuation of Financial Assets

Fi8000 Valuation of Financial Assets. Spring Semester 2010 Dr. Isabel Tkatch Assistant Professor of Finance. Exam #2. 1. Capital Asset Pricing Model 1.1 Efficient portfolios and the separation theorem; 1.2 Diversifiable and non-diversifiable (systematic / market) risk;

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Fi8000 Valuation of Financial Assets

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  1. Fi8000Valuation ofFinancial Assets Spring Semester 2010 Dr. Isabel Tkatch Assistant Professor of Finance

  2. Exam #2 1. Capital Asset Pricing Model 1.1 Efficient portfolios and the separation theorem; 1.2 Diversifiable and non-diversifiable (systematic / market) risk; 1.3 The definition of beta and CAPM equilibrium (SML equation); 1.4 Expected return, variance and beta calculations for portfolios and for efficient portfolios; 1.5 Pricing: overpriced and underpriced risky assets. 2. Market Efficiency – definitions, examples and implications 3. Derivatives – Call and Put Options 1.1 Definitions of European / American call and put options; 1.2 Payoff diagrams for long / short position in stock / bond / call option / put option / portfolios.

  3. Instructions • Bring your own formulas – One page (letter) with formulas printed or written on one side • Bring your calculator • Make sure that it works • Make sure that you know how to use it • Three - Four open questions, 90 minutes. • Write down the data and the details of your calculations • Simple questions are not a trap • Read each question carefully and make sure that you are providing the solution that the question is seeking • If you need the result of a part that you were not able to solve, pick a reasonable number, write down your assumption and use it to solve the next part.

  4. Read and Practice • Practice sets: • BKM 8th Ed. Ch. 7: 14-19 CFA: 4-6, 10-11; • BKM 8th Ed. Ch. 9: 1-2, 4-17, CFA: 3-10; • BKM 8th Ed. Ch. 11: 1-3, 6-5, 13, 19, 20, 23, CFA: 1-4; • BKM 8th Ed. Ch. 20: 5-6, 17-19, 21-23; • Options Practice Set:1-16. • Practice Quizzes: • Quiz 2: 2 – 7; • Quiz 3: 1. • Book Chapters: Mean Variance Efficient Portfolios: Ch. 7; The Capital Asset Pricing Model: Ch. 9; Market Efficiency: Ch. 11; Options Markets - Introduction: Ch. 20.

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