Midterm Exam

CUNY Brooklyn College
FINC 3390 – Financial Modeling

Semester: Spring 2023
Seungho Baek
Exam Date: April 03, 2023 TIME: 5:05 pm - 7:55 pm
INSTRUCTIONS
1. This IS an OPEN BOOK exam.
2. This examination paper contains ELEVEN (11) questions and com-

prises SEVEN (7) printed pages.
3. To answer all questions, use an excel template file named exam data.xlsx
as posted to Blackboard. Do not hardcopy your answer. You must
demonstrate how to get answers using excel functions or you will get
zero points.
4. You must submit your excel file by 7:55 pm via Blackboard. No LATE
submission is allowed.
5. Good luck!
FINC 3390
Question 1. (25 marks)

Find a sheet named ”Question1” in the excel file. In Question 1, there are
two data series. One in Columns A and B is the 3-month daily treasury bill
rates from Jan. 4, 1954 to Sep. 19, 2005. The other in Columns I and J is
the 3-month daily treasury bill rates from Sep. 20, 2005 to Sep. 22, 2009.
(Notice that the format of column A is a date, while that of column I is a
text.)
(i) Count the number of days using the DATE variable in Column A.
(ii) Count the number of days using the DATE variable in Column I.
(iii) Create new columns showing Year, Month, and Day in Columns C, D,
and E, respectively using the DATE variable in Column A.
(iv) Create new columns showing Year, Month, and Day in Columns K, L,
and M, respectively using the DATE variable in Column I.
(v) Using the DATE variable in Column I, change a text format to a date
format.

Suppose that you have been attained to work as a fixed-income security
analyst at Morgan Stanley’s fixed-income unit. Your team is managing 115
U.S. Treasury Strips as in Question 2 in Excel. Your boss asks to calculate
the number of days until maturity for 115 securities. Assuming that today
is September 24, 2009, find the respective time to maturity in Column D.
2
FINC 3390

You want to examine the 3-month daily treasury bill rates from Jan. 4, 1954
to Sep. 22, 2009 in Question 3. Use the t-bill rates and answer the following
questions.
(i) Find mean, median, stand deviation, variance, maximum, minimum,

skewness, and kurtosis of the t-bill rates using the respective excel func-
tions.
(ii) Explain all the statistics.
(iii) Use Data Analysis Toolpak and generate the same statistics as in Ques-
tion 3-(i).
(iv) Make a frequency table. When you create bin ranges, use an increment
of 1 percent.
(v) Based on the frequency table, create a new column that shows the
respective relative frequencies for each range. (Note: You can find
the relative frequencies using the following formula: the number of
frequencies for each bracket/total observations)
(vi) Plot a histogram either using the raw frequencies or the relative fre-
quencies and describe the plot.
(vii) Look up the T-bill rates for the corresponding dates in Column N and
fill in the T-bill rates in Column O.

There are the 1-month, 3-month, and 6-month daily treasury bill rates from
Jan. 4, 1954 to Sep. 22, 2009 in Question 3. Look up the 6-month treasury
bill rates for the corresponding dates in Column H and fill in the T-bill rates
in Column I.
3
FINC 3390

Use a series of weekly S&P 500 index returns from Apr. 7, 2017 to Mar. 31,
2023 in Question 4.
(i) In Column A, there is no specific number format. Change it to an

appropriate date format.
(ii) Calculate weekly compounded index returns on Column D.
(iii) Calculate continuously compounded index returns on Column E.
(iv) Compute cumulative index returns on Column F using the returns on

Column D.
(v) Compute cumulative index returns on Column G using the continuously

compounding returns on Column E.
(vi) Using two cumulative returns (Columns F and G), make a graph show-
ing cumulative returns each week.
(vii) Using the weekly returns in Column D, compute the average and stan-
dard deviation of the weekly returns.
(viii) Employing the numbers in Question 4-(vii), compute the annualized

return and standard deviation.

You are considering buying a car from a local auto dealer. The dealer offers
you one of two payment options:
• You can pay $25,000.
• The ”deferred payment plan”, You can pay the deal $4,000 cash today
and a payment of $1,000 at the end of each of the next 30 months.
Solve all the problems using the spreadsheet in Question 5. (Note: Only
part of the spreadsheet is provided. You need to do this calculation for all
30 months.)
4
FINC 3390
(i) Assuming that 1.17 percent is the opportunity cost, calculate the present
value of all the payments on the dealer’s deferred payment plan.
(ii) What is the effective interest rate being charged by the dealer?

Consider an investment that costs 1,000 and has cash flows of 400, 250, 200,
150, and 120 in years 1-5 (as in a spreadsheet in Question 6. Only part of
the spreadsheet is provided.).
(i) Set up a loan table that shows an interest rate of 7 percent and find an
IRR using either Goal Seek or Solver.
(ii) Compute IRR using an excel function and see if you can have the same
number as in Question 6-(i).

The following cash-flow pattern has two IRRs.
Year Cash Flow

0 -500
1 600
2 300
3 500
4 200
5 -1000
(i) Using Excel (hint: Data Table) to draw a graph of the NPV of these
cash flows as a function of the discount rate.
(ii) Based on the above graph, use the IRR function to identify the two
IRRs.
5
FINC 3390
(iii) Would you invest in this project if the opportunity cost were 30 percent?

Consider a regression of CISCO stock return (ticker: CSCO) on S&P 500
index return, which is specified as
RCSCO = α + βRSP 500 + ε
where RCSCO represents cisco stock return, RSP 500 is S&P index return, and
ε is an error term.
(i) Estimate α, β, and R-squared.
(ii) Make a graph showing the relationship between CISCO stock return
(ticker: CSCO) on S&P 500 index return. When you make the graph,
you have to add a trend line, the regression equation, and the R-squared
of the regression estimation to the graph.
(iii) Numerically estimate α and β using the least squared estimation method.
Hint: Find the solution of the below optimization problem using Solver.
X
Min = (RCSCO − α − βRSP 500 )2 = ε2
α,β
all

The spreadsheet in Question 9 shows a net present value and internal rate of
return calculation for a project. Use Data Table to do a sensitivity analysis
on the NPV of the project varying the discount rates from 0%, 3%, ..., 24%
and varying the growth rate from 0%, 3%, ..., 12%.
6
FINC 3390

Suppose you are a portfolio investment analyst at Goldman Sachs managing
an equity portfolio (named GSP1 ) that consists of two stock assets (Apple
(AAPL) and Microsoft(Ticker: MSFT)). Use the data in Question 10 and
solve all the questions.
(i) Compute the respective average, standard deviation, and covariance of

monthly stock returns.
(ii) Make a covariance matrix using two portfolio components. Note that
you have to make a completed form of a matrix as below.
2

σAAP L = σAAP L,AAP L σAAP L,M SF T = σM SF T,AAP L
ΣGSP1 = 2
σM SF T,AAP L = σAAP L,M SF T σM SF T = σM SF T,M SF T
(iii) Using the obtained statistics from question 10-(i), calculate an equal-
weighted portfolio return and portfolio variance for the first portfolio
using the below equations.
E(RGSP1 ) = wAAP L r̄AAP L + wM SF T r̄M SF T
2 2 2 2 2
σGSP1
= wAAP L σAAP L + wM SF T σM SF T + 2wAAP L wM SF T σAAP L,M SF T
(iv) Using the matrix multiplication method (i.e. MMULT in Excel.), com-
pute the portfolio return and portfolio variance.
E(RGSP1 ) = w · rT
2
σGSP1
= w · Σ · wT
END OF PAPER

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CUNY Brooklyn College

FINC 3390 – Financial Modeling

Exam Date: April 03, 2023 TIME: 5:05 pm - 7:55 pm

1. This IS an OPEN BOOK exam.

2. This examination paper contains ELEVEN (11) questions and com-

Question 1. (25 marks)

Question 2. (10 marks)

Question 3. (20 marks)

(i) Find mean, median, stand deviation, variance, maximum, minimum,

(ii) Explain all the statistics.

Question 4. (20 marks)

Question 5. (20 marks)

(i) In Column A, there is no specific number format. Change it to an

(ii) Calculate weekly compounded index returns on Column D.

(iii) Calculate continuously compounded index returns on Column E.

(iv) Compute cumulative index returns on Column F using the returns on

(v) Compute cumulative index returns on Column G using the continuously

(viii) Employing the numbers in Question 4-(vii), compute the annualized

Question 6. (20 marks)

• You can pay $25,000.

Question 7. (20 marks)

Question 8. (20 marks)

Year Cash Flow

Question 9. (20 marks)

Question 10. (20 marks)

Question 11. (20 marks)

(i) Compute the respective average, standard deviation, and covariance of

E(RGSP1 ) = wAAP L r̄AAP L + wM SF T r̄M SF T

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