Tomorrow afternoon’s midterm exam in Finance 4335 consists of four problems. Since your exam grade will be based upon the three

highest scoring problems of these four, feel free to either work all four problems or just three of the four problems. Each problem is worth 32 points; thus three problems times 32 points each totals 96

points. I will add an additional 4 points on your exam if you also legibly write your name on the cover page in the space provided. Thus, the maximum number of points possible on this exam is 100 points. Furthermore, I have also posted the formula sheet for Midterm Exam 1, which will be included as part of the exam booklet. I recommend that y’all familiarize yourselves with this document sometime prior to tomorrow’s exam.

I’d like to make an important point about the formulas provided on the formula sheet. What you’ll find there is not a complete census of all formulas used to date in Finance 4335. For example, I don’t include any insurance pricing formulas. By now, I assume that everyone knows that an actuarially fair price for an insurance policy is simply the expected value of the claim/indemnity under said policy. On the other hand, an actuarially “unfair” policy has a “premium loading” which represents a “markup” from the actuarially fair price. Also, I recommend when performing expected utility calculations, I recommend that you go out to no less than the 3rd digit to the right of the decimal point.

Unfortunately, I cannot be at the exam tomorrow due to an important medical issue affecting a close member of my family. Professor Paul Anderson has graciously agreed to proctor tomorrow’s exam in my place.

See y’all next week!

Dr. Garven