Title: Question Types: Multiple choice, Truefalse w explanation, Short answer, Short essay, Fillintheblank
1- Question Types Multiple choice, True/false w/
explanation, Short answer, Short essay,
Fill-in-the-blank - Problems Multiple choice answer must show all
work / calculator inputs cash flow diagrams - Overview of Finance
- The difference between Value and Price
- Return, ROR, Yield, Rate of Profit
Profit/Investment - Chapter 5
- Concept Questions
- Interest rate (what it is, what it does)
- 4 major factors that affect the cost of money
(short answer identify describe effects
provide examples) - 4 secondary factors that affect the cost of money
(short answer identify describe effects
provide examples) - Components of interest rates (r
rIPDRPLPMRP) (short answer identify
describe what they do) - Nominal risk-free rate (rRF)
- Minimum ROR
- Term structure of interest rates (definition)
- Yield curve
- definition
- how to read it
2- Chapter 4
- Concept Questions
- Future value (definition)
- Present value (definition)
- Compounding (definition)
- Discounting (definition)
- Whats the difference between a nominal rate and
EAR - The 1, all-important, never-to-be-forgotten
process used to determine the theoretical/fair
market value of any financial asset - rnominal, rperiodic
- Know the effects of other-than-annual compounding
on PV, FV - Types of Problems (work them any way you know
how) - Find FV
- Find PV
- Find r
- Find n
- Annuities (ordinary due)
- Find PMT
- Un-even cash flows
- Perpetuities
3- Chapter 6 Bonds
- Concept Questions
- The fundamental, all-important,
never-to-be-forgotten valuation concept process - Bond terms Premium bond, discount bond, selling
at par - Bond value sensitivity to changing rd
- bond investment decisions
- Interest rate risk, reinvestment risk
- Bond ratings
- Different types of bonds convertible bond,
warrants, etc. - Why rd is used as the discount rate
- Types of Problems
- Find fair market value/theoretical value of a
bond - Given 2 bonds, which is most fairly priced
- Find bond YTM
- Find expected realized total return / yield for
bonds
4Formulas ROR Profit/Investment (Sales
Price COGS)/COGS (End Price Begin Price) /
Begin Price (New Old) / Old Cost
of Money Nominal Interest Rate r r IP
DRP LP MRP Time Value of Money
Discrete Compounding rperiodic rnominal/m n
m x T FV PV(1 rnominal/m)n PV FV / (1
rnominal/m)n EAR (1 rnominal/m)m 1
PVperpetuity PMT / rperiodic Continuous
Compounding FV PVerT PV FV / erT EAR er
1 Bonds Cpn FV(rCPN/m) Capital Gains
Yield ROR Bond Total Yield EARCoupon
Capital Gains Yield Real ROR (1 rnominal
)/(1 Inflation) - 1