Finance Final Exam Study Set
- Cornell University
- Applied Economics And Management
- Applied Economics And Management 3240
- Finance Final Exam Study Set
Last Modified: 2011-07-20
**need to express in terms of interest rate/period--> divide APR/#periods
B=market value of debt
--> this levers the unlevered firm
ex. common stock repurchase in exchange for new debt issue
(owner will have either a positive or ZERO payoff at maturity)
*lower European put value (PV of price received is lower)
V shape = volatility (buyer bets on big price moves)
*describes the relationship between the price of a put and a call (it does exist)
*use when combining a long stock with a long put
forward and future price don't have to be equal
WIN ==> price is more than forward price and LOSE ==> price is less than forward price
*"good faith deposit"- 5-10% of margin account
returns are lowest in Sept and Oct.
VALUE FUND ==> LOW P/E
GROWTH FUND ==> HIGH P/E
**may not be efficiently priced
this is a cycle!
- superior research to develop products and markets
- lack of cutthroat competition
- immunity from gov't regulation
- low labor costs ==> high paid employees
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