English

Management of Financial Institutions: Fin 3505. Sample M1 Spring 2015

Practice Questions (NOTE: The exam may be more challenging): Due Date: 2/16/2015.

Please submit a complete set of detailed answers for all problem and multiple choice questions in the beginning of the class. Please keep another copy for our review.

Problems:

(Present the formulas you are using and show the details of your work. Write legibly).

1. The Mellon open-end fund, with 1,000,000 shares outstanding, has the following assets in its portfolio: 200,000 shares of P&G currently priced at $75, and 250,000 shares of Intel currently prices at $95, and 300,000 shares of Microsoft currently priced at $80. The Carnegie closed-end fund has the following stocks in its portfolio: 200,000 shares of REITs priced at $5 and $1B of real estate and 30-year mortgages. It has a total of 500,000 shares outstanding.

a. What is the total NAV and NAV per share of the Mellon and Carnegie funds?

Mellon NAV = 200,000P&G x 75 + 250,000Intel x 95 + 300,000 MS x 80 = 15,000,000 + 23,750,000 + 24,000,000 = 62,750,000

Mellon price = NAV/#share = 62,750,000 /1,000,000 = $62.75

Carnegie NAV = 200,000 REITs x 5+ 1,000,000,000 = $1001M

Carnegie NAV/share = 1001 M / 500,000 = $2002

b. If prices of all stocks rise by $10, what would be the new value of the Mellon fund shares?

AV2=200,000 x 85 + 250,000 x 105 + 300,000 x 90 =70,250,000

Price = NAV2/1,000,000 = 70.25

c. Suppose Mellon issues 119,521 new shares of and purchases 100,000 new shares of P&G, what is its new NAV? Assume stock prices are the same as in part (a).

|200,000 x 75 = 15,000,000 |1,000,000 shares |

|250,000 x 95 = 23,750,000 |119,521 x 62.75 = 7,500,000 |

|300,000 x 80 = 24,000,000 | |

|NAV = 62,750,000

d. How are the two funds different?

2. The ABC bank has $100M assets consisting of $45M 1-year 7% coupon bonds and $55M of 10 year, 12% loans. Its liabilities include $75M 1 year 5% IR CDs, $20M 2-year 6% IR...