To The Student

What do you need to understand this book You do not need any specific background in finance. You do need to be thoroughly comfortable with arithmetic and generally comfortable with algebra. You do need mathematical aptitude, but you do not need to know advanced mathematical constructs, such as calculus. Knowledge of statistics would be very helpful, but the book will explain the relevant concepts when the need arises. You should own a S20 scientific calculator. A financial calculator is not...

Side Note

Every instructor can therefore choose his her own favorite selection and ask students to download it. These chapters are free and access is easy. The menu right now contains the following chapters Real Options Real options are briefly covered in Chapter 12 in the text, but not in great detail. This web chapter shows how to use spreadsheets, time-series analysis, Monte Carlo simulation, and optimization to determine the value of a plant that can shut down and reopen (for a...

End of Main Chapter Problems

Q 3.25 A tall Starbucks coffee costs 1.65 a day. If the bank's quoted interest rate is 6 per annum, compounded daily, and if the Starbucks price never changed, what would an endless, inheritable free subscription to Starbucks coffee be worth today Q 3.26 If you could pay for your mortgage forever, how much would you have to pay per month for a 1,000,000 mortgage, at a 6.5 annual interest rate Work out an answer change if the 6.5 is a bank quote and one if it is a true interest rate Q 3.27 What...

End of Chapter Problems

Q 4.25 Would you be willing to pay extra for a project that bears fruit during your lifetime rather than after you are gone Q4.26 How bad a mistake is it to misestimate the cost of capital in a short-term project Please illustrate. Q 4.27 How bad a mistake is it to misestimate the cost of capital in a long-term project Please illustrate. Q4.28 What is the difference between YTM and IRR Q4.29 Aproject has cash flows of - 1,000, 600, and 300 in consecutive years. What is the IRR Q4.30 What is the...