Question (4 points) Describe the difference between bullish and bearish views. Describe the steps in a short sale. Question (4 points) What are the differences between quote driven and order driven...

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Question (4 points) Describe the difference between bullish and bearish views. Describe the steps in a short sale. Question (4 points) What are the differences between quote driven and order driven markets? What is the difference between call and continuous markets? Question (6 points) Your child was just born and you are planning for his/her college education. Based on your wonderful experience in Advanced Finance you decide to send your child to Binghamton University as well. You anticipate the annual tuition to be $50,000 per year for the four years of college. You plan on making equal deposits on your child’s birthday EVERY OTHER YEAR for the ages one through seventeen inclusive to fund his/her education. Assume the first tuition payment is due in exactly 18 years from today and the expected return is 10% over this period. (i) Calculate the bi-annual deposit. (ii) You only plan on making 3 deposits – the first on your child’s 5th birthday, second on their 11th birthday and third on 15th birthday. Each deposit will be double the previous deposit. Calculate each deposit. Question (5 points) Describe the basic principles of credit analysis. How does credit analysis differ for municipal issuers? How does credits analysis differ for sovereign issuers? How does credits analysis differ for ABS issuers? This answer can be brief since we have not discussed securitization in detail. Discuss the basics of Altman’s Z-score. Question (5 points) Explain the differences between the following yield curves: a. On-the-run yield curve b. Off-the-run yield curve c. On and off-the-run yield curve. d. Treasury strip yield curve. e. Swap (LIBOR) yield curve. Question (4 points) What are the key differences between LIBOR, Fed Funds rate, SOFR and Euribor? Question (4 points) Compare open-end and closed-end mutual fund. Question (4 points) Compare a market order and limit order. When would you use a stop-buy order? Question (4 points) Which is a better index to use as a benchmark: DJIA or S&P500? Describe the biases in each index. Describe the differences between price-weighted, fundamental and value-weighted index. Describe the MSCI index. Question (6 points) What are the differences between mutual funds, ETFs and hedge funds? What are the common characteristics of alternative investments? Question (6 points) Briefly summarize life settlements, infrastructure investing, UPREITs and DownREITs Question (10 points) – show all work Describe the steps to deriving the efficient frontier using: (1) Risky assets only (2) Risky AND Rf asset Question (6 points) Describe the differences between Macaulay, modified and effective duration. Explain the difference between positive and negative convexity. Question (6 points) Describe the difference between credit risk, price risk, interest rate risk and reinvestment risk. Question (20 points) Ginny’s Restaurant Problem Ginny is endowed with $10 million and is deciding whether to invest in a restaurant. Assume perfect capital markets with an interest rate of 6%. Investment Option Investment (millions) End of Year CFs (millions) 1 1 1.8 2 2 3.3 3 3 4.4 4 4 5.4 (i) List 4 perfect capital market assumptions. 1. _ ______ 2. _ ______ 3. ______ 4. _ ______ (ii) Which investment option should Ginny choose? Ginny is actively pursuing another business venture as a ticket scalper. She estimates that for a $2 million investment in inventory she can resell her tickets for $6 million over the next year (cash flows realized in exactly one year). Assume the same 6% interest rate. (iii) What is the NPV of the Ticket Brokering venture? (iv) What is the new value of Ginny’s Corporation? (v) Suppose Ginny does not want to use her own $2 million to start the new venture. Instead, she wants to raise equity capital by issuing 100,000 new shares. What price will new investors be willing to pay? (vi) How many shares will need to be sold to outside investors? (vii) How will your answer differ if Ginny is not guaranteed to resell the tickets for $6 million? (ix)According to Ginny’s prospectus, cash flows from ticket sales (net of expenses) are expected to follow the following distribution: Prob Outcome 0.2 $5M 0.5 $3M 0.3 -$2M What is the new value of Ginny’s Corporation? (x)What price will new investors be willing to pay for Ginny’s shares? Question (6 points) Describe the basic shapes of the yield curve over time. Why does the yield curve shift? Question (6 points) Describe the key differences between angel financing, venture capital and private equity. Question (10 points) Describe the key differences between DDM, FCF and Residual Income models Question (6 points) Describe the difference between fundamental, relative and technical analysis Question (15 points) Briefly summarize the articles on Target Date Funds, Liability Driven Investing, Black-Litterman model. Define Social Impact Bonds, Corporate Social Responsibility, Socially Responsible Investing, Thematic investing http://post.nyssa.org/nyssa-news/2010/11/target-date-funds-not-a-set-it-and-forget-it-option.html http://post.nyssa.org/nyssa-news/2010/05/the-prudent-man-standard.html http://post.nyssa.org/nyssa-news/2011/03/black-littermans-model-portfolios-friend-or-foe.html Summarize video: https://www.youtube.com/watch?v=CGjAOaD5RmQ&feature=kp MANDATORY BONUS QUESTION Write your best joke here. Use visual aid as necessary