Math 5621 (369) Financial Mathematics II

(Applied Mathematics of Corporate Finance)


Fall 2011

Instructor – James G. Bridgeman

instructor's web site

syllabus for the course  


Opportunity Cost of Capital and WACC   trinomial default model



The solution manual has an error for exercise 2.8.  You should be able to spot the error yourself, but ask me if you don’t see it.


The solution manual has an error for exercise 5.14 part (b).  A hint for the correct solution: when you sell something short you get cash in return.


A take-home open book final exam was distributed at the end of class on December 9.  Here are the solutions (with correction on 12-19) and a spreadsheet with some of the calculations.  Grades for the exam and paper are posted here.  Final course grades have been posted on the registrar’s system. 

Cumulative assignments (most recent assignment at top)


Read ch. 9 for background

Do exercises 16.1, 16.5, 16.6, 16.7, 16.8 and 16.10

Study sections 16A-D and 16G

Do exercises 15.1-15.9, 15.11-15.15, 15.17-15.18, and 15.20-15.21

Read for background 15K-L

Study Sections 15E-15J

Study Section 14C and Sections 15A-15D

Send Term Paper Outline by Friday Nov. 11

You should send me your term paper topic selection by Friday Nov. 4!

Study sections 7G, H, and I and read 7J and 7K for background

Do exercises 11.1, 11.3, 11.4, 11.8, and 11.9

Study Chapter 11 sections A, D, E, F and G (read the other sections for background only)

Do exercises 10.1, 10.2, 10.5, 10.6, 10.8

Study Chapter 10, sections A, C, E, and F (read the other sections for background only)

Get ready to submit a topic for your term paper on Nov. 4

Do exercises 6.2-6.18, 6.21

Study Chapter 6

Do exercises 5.3-5.7, 5.9-5.11, and 5.13-5.14; make sure you understand exercise 5.8 (but no need to prove)

Study Chapter 5 

Read chapters 3 and 4 for background only

Do exercises 14.1 thru 14.5

Study Chapter 14, section B … keep connections with financial analysis statement handout, chapter 2 and chapter 14A in mind.

Work out formulas like 14A but without assuming that depreciation equals investment required to maintain prior investments

Study Chapter 7, sections A-E

Study Chapter 14, section A … keep in mind the connections with chapter 2 and with financial statements 

Do exercises 2.1 thru 2.11

Study Chapter 2 C-H

Study Opportunity Cost of Capital and WACC (download it just above)

Read for background Chapter 1 and Chapter 2, sections A and B

Study the financial statement analysis handout, do all Quiz questions, Practice Qu. 4,7,8,9,10 and Challenge Qu. 1

(the quiz solutions are in the handout; the PQ and CQ solutions are here.)