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Financial Engineering Test

Preparation

Course Introduction

Financial Engineering is an interdisciplinary course that combines principles from finance, mathematics, statistics, economics, and computer science to design and develop innovative financial products, strategies, and risk management tools. The course explores advanced quantitative methods for pricing securities, managing portfolios, modeling financial markets, and mitigating various types of financial risk. Students learn to apply mathematical models, computational algorithms, and data analysis techniques to solve complex problems in financial markets, including derivatives pricing, asset allocation, and structured finance. The curriculum emphasizes both theoretical foundations and practical applications, preparing students for careers in investment banking, asset management, risk management, and other quantitative finance roles.

Recommended Textbook

Mathematics of Finance 8th Edition by Robert Brown

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8 Chapters

674 Verified Questions

674 Flashcards

Source URL: https://quizplus.com/study-set/3487 Page 2

Chapter 1: Simple Interest and Simple Discount

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118 Verified Questions

118 Flashcards

Source URL: https://quizplus.com/quiz/69258

Sample Questions

Q1) Suppose you deposit $10,000 on March 21 in a fund earning simple interest at r = 13%.How much will you have exactly 6 months later?

A)$10,664.44

B)$10,658.91

C)$10,655.34

D)$10,650.00

Answer: C

Q2) Mary deposits $15,000 in a bank account earning simple interest rate r = 5.25% on October 25,2013 and leaves it on deposit until February 4,2014.Using exact interest,how much interest is earned during the entire investment period?

A)$217.91

B)$223.13

C)$220.07

D)$222.23

Answer: C

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Chapter 2: Compound Interest

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127 Verified Questions

127 Flashcards

Source URL: https://quizplus.com/quiz/69257

Sample Questions

Q1) How long does it take for a loan of $5000 to accumulate $1000 of interest if j2 = 10%?

A)1 year,10 months,13 days

B)1 year,10 months,29 days

C)3 years,8 months,26 days

D)3 years,9 months,28 days

Answer: A

Q2) In a particular year,the interest rate is 5% and the real rate of return is 3%.What is the rate of inflation for the same year?

A)2.06%

B)2.00%

C)1.94%

D)1.85%

Answer: C

Q3) What simple interest rate,r,is equivalent to j6 = 8% over 8 months?

A)16.77%

B)8.16%

C)15.08%

D)7.74%

Answer: B

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Chapter 3: Simple Annuities

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67 Verified Questions

67 Flashcards

Source URL: https://quizplus.com/quiz/69256

Sample Questions

Q1) To buy a used car,you have two options.You can pay $10,400 in cash today (December 12,2014)or you can pay $R every month,from December 12,2014 and to July 12,2017.If the interest rate is j12 = 6%,what is R?

A)$352.50

B)$362.99

C)$350.75

D)$361.19

Answer: C

Q2) To buy some furniture,you can put $150 down and "don't pay a cent" for 6 months.At the end of 6 months,you begin making monthly payments of $100 for 2-years.If j12 = 8.4%,what is the equivalent cash price of the furniture?

A)$2276.68

B)$2261.89

C)$2126.68

D)$2111.89

Answer: A

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Chapter 4: General and Other Annuities

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79 Verified Questions

79 Flashcards

Source URL: https://quizplus.com/quiz/69255

Sample Questions

Q1) $500 is deposited at the end of every three months into an account crediting interest at j2 = 10%.The fund credits simple interest for fractional parts of an interest period.What is the accumulated value of the fund at the end of 3 years?

A)$6885.90

B)$3191.91

C)$6886.94

D)$3400.96

Q2) A couple buys a house and takes out a $250,000 mortgage.They plan to make payments twice a month,with the first payment one half month from now.If they choose a 25 year amortization period and j2 = 4.2%,what is the size of their bi-monthly monthly payments?

A)$670.57

B)$667.62

C)$648.48

D)$618.94

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Chapter 5: Repayment of Debts

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85 Verified Questions

85 Flashcards

Source URL: https://quizplus.com/quiz/69254

Sample Questions

Q1) A loan is being amortized over n-years with monthly payments of $295.32.The rate of interest on the loan is j12 = 12%.The principal repaid in the 25th payment is $206.41.The outstanding balance after 25 payments (months)is $8684.79.What is the outstanding balance immediately after the 26th payment?

A)$8389.47

B)$8476.32

C)$8478.38

D)$8597.94

Q2) Sandy takes out a loan of $22,000 at j12 = 9%,repaid over 5 years with monthly payments.After 24 payments,the outstanding balance on the loan is $14,361.35.Just after the 24th payment,Sandy makes a lump sum payment of $3000 and refinances the loan with monthly payments for two more years at the same interest rate.What is the new monthly payment?

A)$361.29

B)$473.39

C)$519.04

D)$656.09

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Chapter 6: Bonds

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90 Verified Questions

90 Flashcards

Source URL: https://quizplus.com/quiz/69253

Sample Questions

Q1) An XYZ Corporation $2000 bond,paying bond interest at j2= 8%,matures at par on September 1,2023.What did a buyer pay for this bond on July 20,2015,if the market quotation was 104.75?

A)$2156.30

B)$2075.99

C)$2033.70

D)$2114.01

Q2) A $5000 bond pays semi-annual coupons of $150 every April 30th and October 30th.The redemption value is $5075.It is purchased on July 5,2010 at a market (clean)price $5125.What is the full (or dirty)price?

A)$5054.10

B)$5070.90

C)$5129.10

D)$5179.10

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Chapter 7: Business Decisions, Capital Budgeting and Depreciation

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66 Verified Questions

66 Flashcards

Source URL: https://quizplus.com/quiz/69252

Sample Questions

Q1) Plastic trays last 8 years and cost $20 each.Metal trays last 24 years and cost $X.There is no salvage value for either type of tray.Trays need to be purchased today and are assumed to be needed forever.If the interest rate is j1 = 6%,what value of X will the buyer be indifferent to purchasing plastic or metal trays?

A)$42.07

B)$102.68

C)$38.52

D)$40.42

Q2) A machine is purchased for $100,000 and has a salvage value of $12,000 in 25 years.What is the total depreciation for the first 3 years,assuming the constant percentage method? (Answer to the nearest dollar)

A)$22,464

B)$15,601

C)$12,328

D)$6,863

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Chapter 8: Contingent Payments

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42 Verified Questions

42 Flashcards

Source URL: https://quizplus.com/quiz/69251

Sample Questions

Q1) You are considering purchasing a 10-year $10,000 par value bond that pays semi-annual coupons at j2 = 10%.The probability the nth coupon will be defaulted,given that the previous (n - 1)coupons were paid,is 5% for each coupon during the first 5-years and 10% for each coupon for the last 5-years.What price should you pay for the bond if the desired yield is j2 = 8%?

A)$10,220.61

B)$10,425.90

C)$10,882.37

D)$11,610.16

Q2) The probabilities that bond A,B,C and D will pay every one of their coupons along with the redemption value are 50%,70%,80% and 60% respectively.What is the probability that at least three of the bonds will fully meet their obligations?

A)39.4%

B)56.2%

C)85.6%

D)98.8%

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