Final Exam

Professor Amar Gande

FINA 6201
Outline
• Final Exam
– Contribution to course grade
– Big picture
– Materials allowed
– Topics covered
– Rounding your answers
– Preparation
– Date/Time

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Final exam
• Contributes to 40% of your course grade.

• Questions similar to what we did in class, in

the instructional videos, in Quizzes and in
Homeworks.

• Since the final exam is cumulative, if you

score higher on the final exam than on the
midterm exam I will use the higher of the two
to count for your midterm score.
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Final exam
• Big picture:
– You should be able to finish the exam within the
allotted time (3 hours 15 minutes).
– Show your work to receive partial credit in the event
you do not get the correct answer.
– Final Exam FAQ page will be posted in Class 6
module in Canvas and will be updated frequently up
until the final exam date.

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Final exam
• Materials allowed:
– Closed-book: No notes, books etc.
– Financial calculator (TI and HP models mentioned in
course syllabus).
– Laptop if you wish to use Excel for calculations (I will
provide a blank spreadsheet for your calculations).
– Formula sheet (see Class 6 module where it will be
posted) will be provided as part of your final exam.
– Pen and/or pencil.

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Final exam
• Topics covered:
– Time Value of Money.
– Interest Rates.
– Bond Valuation.
– Investment Decision Rules.
– Capital Budgeting and Stock Valuation
– Risk, Return and CAPM
– Cost of Capital and Market Efficiency.

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 Final exam
• Preparation: In the following order of priority
– Instructional Videos and Lecture slides, including
examples and textbook problems we did in class,
including Poll Everywhere.
– All Canvas Quizzes.
– All MyFinanceLab (MFL) Homeworks.
– Practice on MyFinanceLab: Final Exam Review
Homeworks (Optional)
• Questions are identical to the ones in Homeworks
• Unlimited attempts
– Relevant Chapters from required text.
– Attend virtual office hours (Optional).

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Final exam
• Rounding your answers:
– Two decimals for $ (e.g., $100.45) – nearest cent.
– Four decimals for interest rates stated as a percent,
especially monthly interest rates (e.g., 0.4245%).
• If the third and fourth decimals are zero, you may omit them
(e.g., 7.75% is sufficient – no need to state as 7.7500%).

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Final Exam
• Date/time and other details:
– Date: Thursday, October 5th
– Duration: 3 hours 15 minutes
– Time: 9:00 AM-12:15 PM
– Rooms: Collins 200 [Section 011 (AM)] and
Collins 220 [Section 111 (PM)]
– Watch final exam FAQ page in Class 6
module in Canvas for updates until the final
exam date.
– Good Luck 
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Midterm question #10
• Your firm needs to invest in a new delivery truck. The life
expectancy of the delivery truck is five years. You can purchase a
new delivery truck for an upfront cost of $200,000, or you can lease
a truck from the manufacturer for five years for a monthly lease
payment of $4,000 (paid at the end of each month). Your firm can
borrow at an effective annual rate (EAR) of 6.1364%. The effective
monthly discount rate (rounded to four decimals in percent) that you
should use to evaluate the truck lease is closest to:

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Midterm question #11
• Two years ago, you purchased a new SUV. You financed your SUV
for 60 months (with payments made at the end of each month) with
a loan at 6.9% APR with monthly compounding. Your monthly
payments are $617.16 and you have just made your 24th monthly
payment on your SUV. The amount (rounded to nearest dollar) that
was used towards repaying the principal during the first two years of
your loan is closest to:

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Dividend Discount Model
• LollyPop Inc. (LP) is expected to pay a $2.50 dividend
next year, and its dividends are expected to grow at 3%
per year forever. The required return is 10%. What is the
stock price expected to be in year 3?

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Investment-Amazon
• Your investment portfolio consists of ​$13,000 invested in only one
stock -- Amazon. Suppose the​risk-free rate is 4%​, Amazon stock
has an expected return of 11% and a volatility of 42%​, and the
market portfolio has an expected return of 9% and a volatility of
20%. Under the CAPM​assumptions, what is the volatility of the
alternative investment that has the lowest possible volatility while
having the same expected return as​Amazon?

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Stock’s Alpha in a CAPM World
• Select the best answer with respect to a stock's "alpha"?
(In a CAPM world)

(A) The expected return on an asset relative to the

expected return on the market
(B) The expected return on an asset relative to what CAPM
predicts for the asset's expected return
(C) The expected return on an asset relative to the riskiness
of the asset
(D) The expected return on an asset relative to the risk free
rate

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Additional Questions (1 of 3)

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Additional Questions (2 of 3)

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Additional Questions (3 of 3)

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The End