Business Finance Sample Paper
FNCE20001 Business Finance
Semester 2, 2012
FNCE20001 Business Finance
Semester 2, 2012
Sample Final Exam 1
Note:
This is an edited and revised version of a previous final exam. The reading time for this sample exam is 15 minutes and the writing time is 120 minutes. On this semester’s final exam you will be required to write your answers in the exam booklet and you will be provided with adequate space to do so. Note also that the format of this semester’s final exam will differ from the sample exam’s format. Further details on the format of this semester’s final exam will be available from the LMS. The answers to these questions are not being made available as some questions from this sample final exam may be used on this semester’s final exam. The formula sheet will contain all the formulas shown in class on the lecture slides entitled
“Formula Sheet”.
Question 1
[12 3 = 36 marks]
Indicate whether each of the following statements is true or false by circling the appropriate answer. Provide a 2-3 sentence reason and/or calculation and/or diagram to justify your answer.
Note that no reason/explanation implies no marks.
Answers must be written on ruled spaces. All other writing will not be graded. Unruled pages may be used for rough work.
a)
The only difference between the capital market line (CML) and the security market line
(SML) is that in the CML risk is measured using the standard deviation of returns while in the
SML risk is measured using the beta.
b)
The value of an option at expiration is the maximum of its intrinsic value and zero.
c)
Speculators try and identify mispricing is futures markets to make riskfree profits.
d)
The value of a company is normally defined as the market value of its equity plus the net present value of its investment projects.
e)
Modigliani and Miller’s proposition 1 states that the value of a firm’s equity does not change regardless of the level of debt
Semester 2, 2012
FNCE20001 Business Finance
Semester 2, 2012
Sample Final Exam 1
Note:
This is an edited and revised version of a previous final exam. The reading time for this sample exam is 15 minutes and the writing time is 120 minutes. On this semester’s final exam you will be required to write your answers in the exam booklet and you will be provided with adequate space to do so. Note also that the format of this semester’s final exam will differ from the sample exam’s format. Further details on the format of this semester’s final exam will be available from the LMS. The answers to these questions are not being made available as some questions from this sample final exam may be used on this semester’s final exam. The formula sheet will contain all the formulas shown in class on the lecture slides entitled
“Formula Sheet”.
Question 1
[12 3 = 36 marks]
Indicate whether each of the following statements is true or false by circling the appropriate answer. Provide a 2-3 sentence reason and/or calculation and/or diagram to justify your answer.
Note that no reason/explanation implies no marks.
Answers must be written on ruled spaces. All other writing will not be graded. Unruled pages may be used for rough work.
a)
The only difference between the capital market line (CML) and the security market line
(SML) is that in the CML risk is measured using the standard deviation of returns while in the
SML risk is measured using the beta.
b)
The value of an option at expiration is the maximum of its intrinsic value and zero.
c)
Speculators try and identify mispricing is futures markets to make riskfree profits.
d)
The value of a company is normally defined as the market value of its equity plus the net present value of its investment projects.
e)
Modigliani and Miller’s proposition 1 states that the value of a firm’s equity does not change regardless of the level of debt