Winter 2019 MFIN 704 – Midterm Exam Version 2 (C01 –Evening)


MFIN704 Midterm Exam
Date: 2019-02-27
Time: 19:00
Duration: 2.5 hrs
Total Marks: 89

Instructions:
1) Do NOT flip the cover page over until the start of the test.
2) Please make sure you have the correct version of the test. Version 1 for C02 (Wednesday
2:30pm to 5:30pm) or Version 2 for C01 (Wednesday 7:00pm to 10:00pm)
3) You are permitted a single sheet, 8.5”x11” (Letter), as a “cheat” sheet (equations, notes etc.)
4) You are permitted a calculator (non-programmable) either McMaster Standard or CFA Approved
financial calculator.
5) You are permitted to have a water bottle, coffee or other beverage along as there is no writing
on the surface of the container.
6) You may write in pen or pencil, however writing in pencil will make it difficult to challenge
marking especially if there are eraser marks on the page.
7) Cell phones, notebooks, and other personal belongings (including baseball caps) should be left in
your bag placed along the back/front of the room.
8) Please answer questions in the provided notebooks. Clearly indicate which question you are
answering on the page.
9) Remember to write your name, section and version number on the cover of the notebook.
10) Answers to student questions during the exam will be for clarification/correction purposes only.
If required, write an assumption down that clarifies your approach to the question.




(Section Intentionally Left Blank)


Winter 2019 MFIN 704 – Midterm Exam Version 2 (C01 –Evening)
Question 1 [9 marks]:
Name and describe three (3) sources of error we covered in class.

Question 2 [9 marks]:
Represent 26.625 in binary (in form 11111111.1111)

Question 3 [18 marks]:
Find the internal rate of return (IRR) of the following cash flows using Newton’s Method with an initial
guess of r=0.125. Verify your result, should be within +/- $1 after one iteration, stop if it is.
Note: it might be easier to work with the equations if you multiply through by (1 + )2.
= −$400 +
$200
1 +
+
$300
(1 + )2

Question 4 [18 marks]:
Find the center difference approximation of the derivative for () = 2 − 2 + 1 at = 3 for ℎ = 1

Question 5 [12 marks]:
Using the result from Question 4 for the first derivative, find the first order Taylor Approximation at =
3 with ℎ = 2. If (5) = 16, what is the relative error?

Question 6 [8 marks]:
Find the L and U matrix for the following:
[
2 6
1 10
]

Question 7 [15 marks]:
Solve for the unknown using the explicit method for PDE
= 0 = 0.5
+1 = 11 10 11
= 10 6
−1 = 9 5 6










































































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