FNCE 10002 Principles of Finance Semester 2, 2019

Seat No: Student No:

(Do NOT write your name anywhere on this exam booklet)

THE UNIVERSITY OF MELBOURNE

Department of Finance
Faculty of Business and Economics

FINAL EXAMINATION – SEMESTER 2, 2019 – BOOKLET A

SUBJECT NUMBER: FNCE 10002
SUBJECT NAME: PRINCIPLES OF FINANCE
EXAM DURATION: 2 HOURS
READING TIME: 15 MINUTES
TOTAL MARKS: 100
NO. OF PAGES: XX (Booklet A contains YY pages including the cover page and formulae sheet
pages while Booklet B contains ZZ pages including the cover page)

AUTHORIZED MATERIALS
1. This is a CLOSED BOOK exam.
2. The only calculator permitted for use in exams is the Casio FX82 (any suffix).

INSTRUCTIONS TO INVIGILATORS
1. Students should be provided with two exam booklets and a multiple choice answer sheet (MCAS – M1).
Booklet A will contain the multiple choice questions. Booklet B will contain the numerical and short
answer questions.
2. Students are to write answers ONLY on the M1 for booklet A and in the spaces provided in booklet B.
3. Writing is NOT permitted during reading time.
4. Both exam booklets A, B and the M1 MUST be collected at the end of the exam.

INSTRUCTIONS TO STUDENTS
1. Writing is NOT permitted during reading time.
2. Write your seat number and student number in the boxes at the top of this cover page for BOTH booklet A
and B.
3. Complete the multiple choice answer sheet (M1) using a 2B pencil as follows:
 Enter your Student Number in the boxes on the right side of the answer sheet.
 Enter your subject code and Surname in the space provided on the answer sheet.
4. Answer ALL questions. Record your answers to booklet A on the Multiple Choice Answer Sheet (M1).
Answers to booklet B should be written ONLY in the spaces provided in booklet B. Answers recorded in
any other space will not be marked. For full credit show ALL your calculations.
5. Pages titled “THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK” are provided for rough work.
Examiners will NOT take into account anything written on these pages.
6. A formulae list is provided on the last page of booklet A. You may detach that page.
7. Do NOT detach any other pages.
8. Both booklet A and B with the MCAS-M1 must be handed in at the end of the examination. Do NOT
remove this paper from the examination room.
9. Insert MCAS-M1into booklet A. Then insert booklet A into booklet B.

Marks Total Questions Required

Booklet A 50 20 Attempt ALL questions
Booklet B 50 10 Attempt ALL questions
Total 100 30

BAILLIEU LIBRARY
1. This paper may NOT be lodged with the library at any time.

Final Examination 1
FNCE 10002 Principles of Finance Semester 2, 2019

Booklet A 20  2.5 marks = 50 marks

All answers for the section A multiple choice questions have to be answered on the multiple
choice answer sheet (MCAS – M1). You are to fill in all the relevant student information as
well as write your name and student number on the scan sheet. For the scan sheet, you are to
make sure that it is filled in legibly with the use of a 2B pencil. There is only one right
answer per question and always choose the most correct answer. Only mark one answer per
question.

Final Examination 2
FNCE 10002 Principles of Finance Semester 2, 2019

THIS PAGE MAY BE DETACHED FROM THE EXAM BOOKLET

Fn = P0 (1+ r)n P0 = Fn / (1+r)n

P0(OA) = (C/r) [ 1- 1/(1+r)n ] re = (1 + r/m)m - 1

P0(DA) = {(C/r) [ 1- 1/(1+r)n ]}/ (1 + r) n Fn(OA) = (C/r)[(1+r) n – 1]

P0 = [C/r]
P0 = C(1+g)/(r-g)

P0 (AD) = C + [C / r][(1 - (1 + r)-(n-1)] P0 = [C/r]/(1 + r) n

 
P0 =  I kd  1  (1  kd ) n  Pn (1  kd )n
Fn-1 (AD) = {C + [C / r][(1 - (1 + r)-(n-1)]}[1 + r ]n-1

P0  Dt
 Pt 1 
E1 k e  g ke  g
E
Fn = P0 (1+ n*r) P0  1  PVGO
ke
 FaceValue   365 
Annualized Cost of BAB    1   P0 = D0 (1+g) / (ke - g)
 P0  Costs  n 
P0 = Fn /[1 + (n/365)  r]
P0 = Fn / [ 1+ (d/365) r]
n
Ct
NPV    C0 P0 = DP / k P
t 1 1  k 
t

D0 (1  g ) n
Ct
ke 
P0
g  1  r 
t 1
t
 C0  0 

1 Nominal Rate C1 C2 Cn F
Real rate  1 D   
1  Inflation Rate 1  k d 1  k d 2
1  kd  1  kd n
n

Average annual earnings 100 Average annual earnings 100

ra   % ra   %
Initial investment in a project 1 Average investment in a project 1

Net cash flow before tax = CI - CO Company Tax Payable = tC (CI – CO – D)

Net Cash flow after tax = (CI-CO)(1-tC) + tCD

E  D  p
k0  ke  E V   k d  D V  k0  ke    k d    k p  
V  V  V 

ko = kd (1 – tc)(D/V) + ke (E/V) ko = kd (1 – tc)(D/V) + ke (E/V) + kp (P/V)

The formulae sheet continues on the next page

Final Examination 3
FNCE 10002 Principles of Finance Semester 2, 2019

THIS PAGE MAY BE DETACHED FROM THE EXAM BOOKLET

V=D+E+P ke = D1/P0 + (P1 – P0)/P0

Rt = (Pt + Dt – Pt-1)/Pt-1 = (Pt + Dt)/Pt-1 – 1 rt = Ln[(Pt + Dt)/Pt-1]
ra = (R1 + R2 + … + Rn)/n rg = [(1 + R1)(1 + R2) … (1 + Rn)]1/n – 1
σ12 = p1[r11 – E(r1)][r21 – E(r2)] + ... + pn[r1n – B
E(r1)][r2n – E(r2)] wA  and wB  1  wA 
 A B
E(rj) = j = p1R1 + p2R2 + ... + pnRn j2 = p1(R1 - j)2 + p2(R2 - j)2 + ... + pn(Rn - j)2
m m
2   
w *
Min   2 B 2 AB A B
 A   B  2  AB A B
 p= w w 
j =1 k = 1
j k jk 

12   12  1 2 E(rp) = w1E(R1) + w2E(R2)

 p2  w12 12  w22 22  2w1w2 12  p2  w12 12  w22 22  2w1w2 1 2 12
n  jm  j 
E ( R p )   wi E ( Ri ) j    jm  
m m 
2
i=1

E(rp) = rf + [E(rm) - rf ][p /m]

E(rj) = rf + [E(rm) - rf] j
P2 = 2/N + [(N-1)/N] jk
p = w11 + w22 + ... + wnn
Call payoff = Max [ST – X , 0]
Put payoff = Max [X – ST , 0]

F0,t = S0 * (1+c)
Franking/Imputation Credit = D tc/(1 – tc)
Intrinsic value (call) = Max [St – X, 0]
Intrinsic value (put) = Max [X – St , 0]

Final Examination 4