StudyXY
RegisterLog in

FIN 5530: Final Exam - Advanced Financial Risk Management and Decision Analysis

Comprehensive final exam covering financial risk management strategies and decision analysis.

Layla Cooper
Contributor
4.4
60
6 months ago
Preview (2 of 5 Pages)
100%
Purchase to unlock

Page 1

FIN 5530: Final Exam - Advanced Financial Risk Management and Decision Analysis - Page 1 preview image

Loading page ...

FIN 5530:Final Exam-Advanced Financial Risk Management and DecisionAnalysisFinal Exam Dr. Abraham FIN 5530 Answer all questions1.The DEAR for a bank is $6,500. What is the VAR for an 8-day period? A 16-dayperiod?Why is the VAR for a 16-day period not twice as much as that for a 8-day period?VAR for an 8-day periodValueat risk (VAR) = DEAR x√N= 6,500 x√8 = 6,500 x 2.828 =$18,384.77VAR for a 16-day periodValue at risk (VAR) = DEAR x√N= 6,500 x√16 = 6,500 x 4 =$26,000The reason that VAR16(2 x VAR8) is because [16]½(2 x [8]½). The interpretationisthat the daily effects of an adverse event become less as time moves farther away from theevent.2.Bank Yhas an inventory of 14-year zero-coupon bonds with a face value of $400 million.The bonds currently are yielding 8.5 percent in the over-the-counter market.a.What is the modified duration of these bonds?Modified duration = (MD) = D/(1 + r) = 14/(1.085) =12.9032.b.What is the price volatility if the potential adverse move in yields is 25 basis points?Price volatility= (MD) x (potential adverse move in yield)= (12.9032) x (.0025) = 0.03225 or3.225 percent.c.What is the DEAR?Daily earnings at risk (DEAR) = ($ Value of position) x (Price volatility)Dollar value of position = $400m. / (1 + 0.085)14= $127,656,712. Therefore,DEAR = $127,656,712x 0.03225 =$4,116,9283.XInc., a publicly traded manufacturing firm in the United States, has provided thefollowing financial information in its application for a loan. All numbers are in thousands ofdollars.

Page 2

Preview Mode

This document has 5 pages. Sign in to access the full document!

Study Now!

XY-Copilot AI
Unlimited Access
Secure Payment
Instant Access
24/7 Support
Document Chat

Document Details

University
University of New South Wales
Course
FIN 5530
Subject
Finance

Related Documents

View all
Past Exams

Texas Life and Health Insurance Exam 150 Questions

A study-sharing site offering verified Q&A for the Texas Life and Health Insurance Exam. Ideal for candidates preparing for certification with updated 2023 content, covering key laws, policies, and insurance concepts.

Class Notes

Understanding Obligation and Deobligation in Resou

Obligation: legally reserving funds for expenses e.g: travel orders. Deobligation: adjusting obligations downward when actual costs are less, freeing funds for other needs. Ensures efficient effective use of finite resources in government operations.

Solved Assignments

Budgeting for Life After High School

High school budgeting activity featuring a real-life scenario for college student Lisa. Students create a zero-based budget using her income, expenses, and support funds to learn personal finance, savings, and responsible spending.

Solved Assignments

Ch 4 les 1

Zach, a college freshman, uses his new credit card with a 19% APR for emergencies during a work break, facing minimum payments that may lead to costly interest and debt.

Class Notes

Understanding Credit Reports Analyzing John's Fina

This activity uses John Doe's financial story and a sample credit report to help students learn how to read and understand credit reports. Students analyze his credit use, debts, and recent financial inquiries to answer related questions.

Solved Assignments

Financial Statement Analysis

Detailed breakdown of financial statements and key performance indicators.

Solved Assignments

CEO pay at John Deere and Caterpillar

Compares CEO pay at two companies.

Solved Assignments

Financial Planning and Budget Analysis

A financial study on budgeting techniques and financial planning strategies.

Solved Assignments

Financial Research Report

A detailed report analyzing financial trends, risk factors, and economic indicators.

Solved Assignments

WACC Project Verizon Communication Inc

This document provides a comprehensive analysis of the Weighted Average Cost of Capital (WACC) for Verizon, offering insights into financial decision-making and investment strategies.