BUSI 408 FINAL Questions & Answers
##7##
##11##
affect heuristic the reliance on instinct instead of analysis in making decisions (i.e. gut instincts)
option that is exercised at any time until its expiration
american option
represents 90% of all available options
arbitrage investors who buy and sell to exploit mispricings
arithmetic mean used in calculations involving items that have no relationship with each other
as interest rates increase, what happens to decreasing value of bond
the bond worth
lowered dividends
increased growth
as retention rate increases
if roe > r, increased retention increases firm value
unlevered beta
asset beta
measurement of operational risk, and removes the financial risk element
BE = ___________ Be = Ba (1 + D/E (1-t))
BA = ___________ Ba = Be / (1 + D/E * (1-t))
, BUSI 408 FINAL Questions & Answers
the area of finance dealing with the implications of reasoning errors on financial
behavioral finance
decisions
beta measure of an asset's volatility or systematic risk compared to the market as a wh
beta of the entire market? 1
beta of US treasury 0
overconfidence
over-optimism
biases
confirmation bias
fear of missing out
interest-only loan
bond borrower pays interest every period
none of the principle is repaid until the end
bonds are what combined? annuities and lump sums
bond values depend on... interest rates
agents who arrange security transactions among investors (do not own securities
broker
real estate)
where observed prices soar far higher than fundamentals and rational analysis wo
suggest
bubble
can be over weeks, months, or years
, BUSI 408 FINAL Questions & Answers
type of business/industry
business risk
operating leverage (fixed costs)
callable bonds are ______ than non-callable riskier
bonds
call option the right to buy an asset at a fixed price during a particular period
call option value stock value - present value of the exercise price
allows the company to repurchase (call) part of all of the bond issued at the state
prices over a specific time period
call provision
usually above the bond's stated value, and adds a call premium
can you compare a coupon bond with a no
zero-coupon bond?
CAPM
capital asset pricing model required/expected return = risk free rate + (market risk premium * beta)
where market risk premium = E(Rm) - Rf
##7##
##11##
affect heuristic the reliance on instinct instead of analysis in making decisions (i.e. gut instincts)
option that is exercised at any time until its expiration
american option
represents 90% of all available options
arbitrage investors who buy and sell to exploit mispricings
arithmetic mean used in calculations involving items that have no relationship with each other
as interest rates increase, what happens to decreasing value of bond
the bond worth
lowered dividends
increased growth
as retention rate increases
if roe > r, increased retention increases firm value
unlevered beta
asset beta
measurement of operational risk, and removes the financial risk element
BE = ___________ Be = Ba (1 + D/E (1-t))
BA = ___________ Ba = Be / (1 + D/E * (1-t))
, BUSI 408 FINAL Questions & Answers
the area of finance dealing with the implications of reasoning errors on financial
behavioral finance
decisions
beta measure of an asset's volatility or systematic risk compared to the market as a wh
beta of the entire market? 1
beta of US treasury 0
overconfidence
over-optimism
biases
confirmation bias
fear of missing out
interest-only loan
bond borrower pays interest every period
none of the principle is repaid until the end
bonds are what combined? annuities and lump sums
bond values depend on... interest rates
agents who arrange security transactions among investors (do not own securities
broker
real estate)
where observed prices soar far higher than fundamentals and rational analysis wo
suggest
bubble
can be over weeks, months, or years
, BUSI 408 FINAL Questions & Answers
type of business/industry
business risk
operating leverage (fixed costs)
callable bonds are ______ than non-callable riskier
bonds
call option the right to buy an asset at a fixed price during a particular period
call option value stock value - present value of the exercise price
allows the company to repurchase (call) part of all of the bond issued at the state
prices over a specific time period
call provision
usually above the bond's stated value, and adds a call premium
can you compare a coupon bond with a no
zero-coupon bond?
CAPM
capital asset pricing model required/expected return = risk free rate + (market risk premium * beta)
where market risk premium = E(Rm) - Rf
