**PLEASE READ THESE INSTRUCTIONS CAREFULLY BEFORE BEGINNING.**

**PLEASE READ THESE INSTRUCTIONS CAREFULLY BEFORE BEGINNING.**

exam代写 Following instructions is part of what makes a good exam good. Not following them can turn an otherwise good exam into a mediocre exam.

Following instructions is part of what makes a good exam good. Not following them can turn an otherwise good exam into a mediocre exam.

This exam is planned for 3-hours (though an extra hour or so gathering public information might be needed), but you can take as much time as you need. It is due on December 4th, 2018, at 11:59 PM. If you miss the deadline your maximum score will decrease at a rate of 1% per hour, exam代写

### The file should have the answers to each question clearly written,

and any supporting figures, tables (perhaps from excel), diagrams, or graphs. Your answers should briefly describe what you are doing (for example, if describing a calculation using the CAPM, you should write something along the lines of “I used the following equation [CAPM equation], where the risk-free rate is XX%, beta is YY, and the market risk premium is ZZ%”), and provide the answer (as in “using the previous equation I found the expected return of the stock to be WW%”).

Note that the graders will not be looking at spreadsheets with formulas, they will be reading your explanations and will grade you based on what you state and the numbers you get. Any figures, tables or graphs you use should be clearly labeled and clearly referenced in the text. A good answer buried somewhere in a table, without a reference, will probably not be considered a good answer. It’s extremely important that you submit a professional, organized document. As with the labels, if the grader cannot understand what you did in a particular question, you will receive a lower score.

I will only answer questions regarding the final submitted to me via the forum I created in D2l so that everybody sees the questions and the answers. You can expect your questions to be answered within 24 * business *hours (i.e., I do not guarantee answers during the weekend). I will answer all questions posted before Thursday, December 3, at 9:00 AM.

**I will finish answering all questions by Thursday, December 3, at 5:00 PM. This is to provide a long-enough window for you to submit the exam early knowing that no new relevant information will become available.**

**Any questions posted after 9:00 AM Thursday, December 3, will remain unanswered.**#### I’ve designed the test so that each person, exam代写

in effect, has a different final. I do this by asking you to analyze one of the assets you held in your portfolio for the class’ project (questions 1 and 2), and by including questions whose answer change depending on your personal attitudes to risk and wage expectations (questions 3 and 4). You can discuss with your classmates general concepts, such as “how do I calculate beta, and what does it mean?”, or “why do we care about duration”, “how do I compute present values”.

Basically, you can discuss with your classmates what you would normally discuss with a TA or me, but you cannot discuss with anyone the particularities of your exam, such as “how do I answer question 2”, “can I use your template for question 3” (nor, obviously, camouflaged requests that in effect are equivalent to solving a particular question). The only exception is that you can discuss your findings in questions 1 and 2 with your team (otherwise this would not be really helping with your presentations). In addition, you can use anything you want, printed and online, ** except **help from someone else.

**A few extra points: exam代写 **

**A few extra points: exam代写**

- Each question has an “easy” part, followed by increasingly complex parts. I suggest you do all the easy parts first.
- The maximum score in the exam is 100, but the points below add up to 110. That is, there is a 10 point bonus.
- The rubric for questions that require calculations is: o 100% Perfect answer

o 80% Minor numerical mistake

o 60% Logical mistake but generally right

o 40% Multiple logical and/or numerical mistakes o 20% A beginning, but mostly wrong

o 0% Nothing, or barely anything.

- Questions that ask for an explanation, an opinion, or a judgement can be answered in three to five sentences or less. Long, rambling, answers are confusing and I will consider them as weakening the argument. The rubric for these questions is:

o 100% Sound argumentation and logic

o 80% Argumentation misses an important point o 40% Weak argumentation

o 0% Off point or erroneous argumentation exam代写

- Besides testing your understanding of the key concepts in the course, part of the goal of this exam is to help you advance with your team presentations due next week. With that in mind, please choose one of the stocks your team invested in to complete the exam.
.If your team is larger than the number of stocks (for example, if the team had 5 members and invested in only 4 stocks), or the team invested in other types of assets such as ETFs, or if you just don’t feel like doing any of the stocks in your portfolio, then you can choose an asset from this list:**Coordinate with your team members so that each team member chooses a different stock for the exam**

o American Airlines (AAL) o United Airlines (UAL)

o Southwest Airlines (LUV) o Alaska Airlines (ALK)

##### o Spirit Airlines (SAVE)

- Gather data for your chosen stock. In particular:

o It’s most recent annual financial statements

o Daily historic prices stretching back to August 2016 (or the maximum available)

o Daily historic prices for the S&P500 index (we will use this as “the market”) and for the

HML factor (you find these in French’s website until September; use the data until

September).

- Gather data about the economy. In particular the zero-coupon yield curve.
- Please include in your exam, towards the beginning, a note of where you got the information.

**Let the fun begin…maximum grade = 100, points below add to 110. exam代写 **

**Let the fun begin…maximum grade = 100, points below add to 110. exam代写**

#### 1.(30 pts) Betas and risk factors

1.(10 pts) Calculate the volatility and market beta for your stock. Is the result you found reasonable? Why or why not?

2.(5 pts) Is this stock a growth stock, or a value stock? Why?

3.(5 pts) Calculate the “beta” for your stock with respect to the HML factor as part of a multi-factor model where the other factor is the market. Does your stock’s returns appear to be priced by HML? (i.e., is the “beta” with respect to HML different from 0?)

4.(5 pts) Is your answer to 1.b consistent with what you found in 1.c?

5.(5 pts) Suppose that you are the CEO of the stock you are analyzing. What type of investments,or change in strategy, would you pursue if you wanted to lower the beta of your stock? (Note: changing leverage changes beta; this is not what I am looking for. What I am looking for are strategies that lower the riskiness of the business.)

#### 2.(30 pts, note you answer only parts d or e, not both) Valuation. exam代写

Identify 3 publicly-traded key competitors of the firm you are analyzing. For each competitor, find their most recent annual EBITDA, market capitalization consistent with the release of the EBITDA (so, if they released their 10-K on June 27, then you are looking for the closing price on June 27), and long-term debt. For the calculations below, assume the market value of long-term debt equals the book value of long-term debt. Also, assume a firm’s enterprise value is its market capitalization plus its long-term debt.

a.(10 pts) Calculate the Enterprise Value/EBITDA multiple for each competitor.

b. (10 pts) Which multiple of the three you calculated in 2.a would be more appropriate for the company you are analyzing? (i.e., which of the 3 competitors is the most appropriatecomparable firm to the one you are analyzing?) Why?

c. (5 pts) Use the multiple from the competitor you deem closest to your firm to estimate theenterprise value of the firm you are analyzing. What is the implied share price for the company

##### you are analyzing?

d. (5 pts)Answer only if the price you found in 2.c is different from the actual price measured at the time of the last release of your firm’s 10-k. Explain why you think the implied share pricefrom 2.c is different from the actual price.

e. (5 pts) Answer only if the price you found in 2.c is similar the actual price (within 5%). Firmsrelease their 10-ks at different times of the year and I’ve asked you to use the price for each firm immediately after the last 10-k release to calculate the multiples above. Is there a problem comparing multiples for these firms that are measured at different points in time? Why or why not? exam代写

#### 3.(35 pts) Your personal portfolio.

Note: below I ask for your risk tolerance, or the wages you think you can earn when you graduate. I ask these questions to make the exercise relevant for your life. The answers to these questions in no way change whether the calculations below are right or wrong, they are just inputs in your calculations. Feel free to use A = 5, and the average starting salary for Finance BComm reported by Haskayne as $62,707 (for 2014 graduates), if you would rather not use your own thoughts about these inputs.

##### 1.(10 pts) How risk averse are you?

If you like risk, give yourself a risk aversion coefficient A=3. If you are uncomfortable taking a lot of risk, give yourself a risk aversion coefficient A=7. Choose anywhere in between. Assuming an annual Sharpe ratio of .4, and a stock-market volatility of .18, and assuming your preferences for risk can be summarized by the mean-variance utility function we discussed during the course (and discussed in the book in Chapter 5), what fraction of your investments should you allocate to stocks?

##### 2.(10 pts) Let’s include your human capital as part of your investments.

Take whatever you think your starting annual wages will be when you graduate, grow them by 5% per year for the first 10 years, by 3% for the second 10 years, by 1% for the next 10 years, and by 0% for the last 10 years (so, basically, a 40-year career). Also assume that you can discount this cash flow by the risk-free rate of 3% per year for the whole 40 years (i.e., we are assuming your human capital is riskless).

The value of your human capital is the present value of your wages after you graduate. What is the value of your human capital upon graduation? Note: assume you start working immediately after you graduate, and also assume that you receive your wages as an annual payment at the end of each year you’ve been working (i.e., if you start working in July, you get paid at the end of June the following year).

##### 3.(5 pts) Let’s say you have $10,000 in financial investments when you start working.

(This was not my case, I had tons of debt!) The * total *value of your investments will equal your human capital plus those $10,000. Suppose the percentage you want to allocate to stocks of your

*investments is what you found in question 3.a. What percentage of the $10,000 should you allocate to stocks, such that the weight of stocks in your*

*total**investments equals the desired amount from 3.a? (Hint: we are assuming human capital is riskless, that is, it counts as an investment in the riskless asset.) exam代写*

*total*4.(5 pts) Suppose now that 10 years have gone by, and you contemplate the remaining 30-years of your career. What is the value of your human capital at that point? (Keep all the assumptions from part 3.b)

5.(5 pts) Let’s say that you’ve saved during the first 20 years of your career, and now you have $500,000 in financial investments. Repeat question 3.c assuming your total investments consist of these $500,000 plus your remaining human capital at this point.

#### 4.(15 pts) Managing interest-rate risk exam代写

- (10 pts) What is the modified duration of your human capital before graduation? Keep all

assumptions from question 3.b, but further assume that the growth rates of your wages do not

change when interest rates change (Hint: this makes the calculation easy.)

- (5 pts) Suppose you wanted to “immunize” your human capital. More precisely, you want to

make an investment such that the value of that investment goes up and down with the value of your human capital as interest rate changes. What investment will achieve this goal? Note: there are infinite correct answers, be * very *precise in describing your investment, as in stating which particular instruments (they should actually exist) you would use, to ensure a grader can determine it works. Hint: investments can consist of short positions.

#### 5.(n pts) Let’s now suppose something else…no, just kidding, you are done! But let’s take this space to reflect on what we did in this exam:

- The first question will be relevant for any analysis you perform of a particular firm’s riskiness. If you are not making calculations, but you are “in charge” question 1.e should inform your thinking about your firm’s strategy.
- The second question replicates something you will have to do every time you perform a valuation. You will notice that most people calculate the numbers, take an average, and move on. The key for analyzing multiples intelligently is to be able to answer questions 2.b and 2.e in a coherent manner. exam代写

##### 3.The third question is one you will likely confront as soon as you join the workforce. exam代写

If your new job comes with a defined contribution plan (as opposed to what used to be standard, the defined benefit plan) you will be offered a wide variety of options for investing your employer- sponsored savings. The “hottest” product these days are funds called “Target Date Funds”.

These funds automatically adjust the percentage allocated to stocks and bonds to incorporate your aging over time. Part of the theory behind them is captured in question 3 of the exam: as time progresses the relative weight of human capital in your total investments goes down, and as a result your allocation to risky assets in the * financial *portion of your assets changes.

You will probably be offered these funds as your “default option”; it’s good if you know how to think about the problem in case you want to move to a different option. To have a view, you have to be able to perform the calculations in question 3. A key assumption for the solution of this problem was that your human capital was riskless. This assumption is clearly not true for some professions (such as stock broker), so it’s key if you are doing this type of calculation to adjust for human capital’s riskiness.

##### 4.The last question again emphasizes

the issues surrounding that big asset we carry around that we don’t typically quantify when we think about our overall portfolio. That asset’s value moves around with interest rates, and if you are worried about your overall portfolio’s exposure to interest rates (a “hot” topic right now considering short-term interest rates are expected to rise) then you should include your human capital, and should think about how to hedge that risk. Note that the impact of interest rates moving made the news on November 28 when statements from the Fed’s chairman suggested that interest rates would not go up as much in the next few months as previously though. Markets rallied in response.

Hopefully you will remember these points when the issues above show up in your personal and professional life. Good luck with those!

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