CORPORATEFINANCE考试题.docxVIP

MN7032, Corporate Finance Dr. Maria Boutchkova University of Leicester, School Page PAGE \* MERGEFORMAT 3 of NUMPAGES \* MERGEFORMAT 3 MSc Finance; MSc Finance and Accounting Practice Problems set #1: Applying the Normal distribution table; Interpreting beta regression output Dr. Maria Boutchkova Winter Semester 2011 Use the Normal distribution table at the end of this document to solve the two following problems. Problem 1 Consider the asset classes in the table below. For each of them calculate: the 95% confidence interval for the return you can expect the probability with which you expect to make at least 5% return the probability that your return will be in the interval [-10%,10%] 1926-2005 Arithmetic Mean Risk Premium Standard Deviation Small company Shares 17.40% 13.60% 32.90% Large-Company Shares 12.30% 8.50% 20.20% Long-term corporate bonds 6.20% 2.40% 8.50% Long-term government bonds 5.80% 2.00% 9.20% Medium-term government bonds 5.50% 1.70% 5.70% U.S. Treasury bills 3.80% 3.10% Problem 2 Consider the output from the regression of Ford Motor Co. returns on the SP500: Over the period 1977-2010: ; slope coef. st. error=0.1197 Over the period 2004-2010: ; slope coef. st. error=0.4822 Calculate and interpret Jensen’s alpha over the two estimation periods given the following data on average yields on government bonds: 7-year average yield 30-year average yield 3-month Treasury bills 1.55% 4.02% 5-year Government bonds 3.41% 6.37% 30-year Government bonds 4.83% 7.26% Calculate and interpret the 95% confidence interval of the two beta estimates Interpret the R2s of the two regressions