Finc 306 - Study guides, Class notes & Summaries

What is a Forward Contract? Ans- ∙A forward contract is a binding agreement to buy/sell an underlying asset in the future at a price set today Describe the meaning of a forward price, delivery date and payoff of a forward contract Ans- ∙The forward price is the price at which two parties agree today to transact/deliver in the future ∙The delivery date is the time at which the contract is settled ∙The payoff of a forward contract is the value created by the position at expira...

Define Derivarive a financial instrument that has a value determined by the value of something else (underlying) Examples of Derivatives Stocks, bonds, commodities, currencies, interest rates Types of Derivatives Forwards, futures, options, swaps Why use derivatives Risk management Speculation Reduce transaction costs Regulatory Arbitrage

What is a Forward Contract? ∙A forward contract is a binding agreement to buy/sell an underlying asset in the future at a price set today Describe the meaning of a forward price, delivery date and payoff of a forward contract ∙The forward price is the price at which two parties agree today to transact/deliver in the future ∙The delivery date is the time at which the contract is settled ∙The payoff of a forward contract is the value created by the position at expiration Payoff f...

FINC 306 Exam Questions With 100% Correct Answers. What is a Forward Contract? - answer∙A forward contract is a binding agreement to buy/sell an underlying asset in the future at a price set today Describe the meaning of a forward price, delivery date and payoff of a forward contract - answer∙The forward price is the price at which two parties agree today to transact/deliver in the future ∙The delivery date is the time at which the contract is settled ∙The payoff of a forward con...

What Is a Derivative?A financial instrument that has a value determined by the price of something else (i.e., the underlying). NovationNovation is the substitution of one counterparty for another. Common underlying assetsThe most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. What are the four stages of derivatives history presented in lectures?1. In ancient Greece, around the 6th century B.C., there were the equivalent of der...

FINC 306 Exam 3 UTK Questions With 100% Correct Answers. 14.25% - answerStock A has an expected return of 12%, and Stock B has an expected return of 15%. If you invest $10,000 in Stock A and $30,000 in Stock B, what is the expected return for your portfolio? 13.5% 12% 15% 14.25% between 0 and 1 - answerWhat is the average correlation between a randomly selected pair of U.S. stocks? between 0 and 1 1 0 -1 False - answerThink about a portfolio where $100,000 is spread equally across...

FINC 306 FINAL Exam Questions With 100% Correct Answers. If you are doing an NPV analysis and using the WACC as the discount rate, how do you account for interest paid to bondholders? - answerthrough the cost of debt portion of the WACC When estimating the WACC, which is the best measure of the firm's cost of debt - answerthe YTM for its bonds When estimating the WACC, which is the best measure of the firm's cost of equity - answerthe stock's expected return according to the CAPM When...

DerivativeA financial instrument that has a value determined by the price of the underlying. An agreement between two parties Underlying assetsthe most common include stocks, bonds, commodities, currencies, interest rates and market indexes Types of DerivativesForwards, futures, options, swaps Use of derivativesrisk management, speculation, reduce transaction costs, regulatory arbitrage

If you are doing an NPV analysis and using the WACC as the discount rate, how do you account for interest paid to bondholders? - correct answer through the cost of debt portion of the WACC When estimating the WACC, which is the best measure of the firm's cost of debt - correct answer the YTM for its bonds When estimating the WACC, which is the best measure of the firm's cost of equity - correct ...