Hints about the final exam in Finance 4335…

The final exam for Finance 4335 is scheduled for Tuesday, December 12, 2:00 p.m. – 4:00 p.m. in Foster 402. The exam consists of two parts:

  • The first part features five multiple-choice questions worth 5 points each. The questions are mostly on the topic of decision theory; e.g., risk neutrality, risk aversion, risk loving, maximizing expected utility, calculating expected payoffs on gambles, etc.
  • The second part consists of three problems worth 24 points each. The topics covered include demand for insurance, applying the Black-Scholes-Merton option pricing formula to evaluate risk of default by a limited liability corporation, and evaluating whether the firm should hedge, given tax asymmetries.

The “good” news is that you automatically receive 3 points for signing your name on this exam booklet; thus, the total points possible for this exam are 100.

Later today, I will post the formula sheet which will appear as part of the Final Exam booklet; it may help you study for the exam by looking over the various formulas.

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