State Farm State Farm Presentation Review for midterm exam Overview of company Insurance companies and investments State Farm’s investment department Fixed income investing Class activities Review for midterm exam

Exam will be during class Midterm Exam Tuesday - March 6, 2007 Exam will be during class 215 David Kinley Hall

Midterm Exam Details Exam is open book, open note. You may use calculators, including financial calculators, but not laptops, cell phones or any other communication devices. Test covers material from lectures 1-13 (including guest speakers and student presentations), assignments 1-2 and the Ben & Jerry’s case. Keys for the assignments will be posted today (3/1) Exam tests your ability to perform calculations and to explain corporate finance concepts.

Test Taking Advice First answer all the questions you can without relying extensively on your notes. Then work on the remaining questions if time permits.

Exam Topics Include - 1 Corporations Roles and Titles of Financial Managers Principal-Agent Problems Financial Statements Balance Sheet (Figure 29.1) Income Statement (Figure 29.2) Sources and Uses of Funds (Figure 29.3) Measuring a Firm’s Financial Condition Key Financial Ratios Financial Planning Introduction to Present Value Objectives of the Firm Corporate Governance

Exam Topics Include - 2 Calculations Bond Valuation Stock Valuation Valuing Assets Perpetuities and Annuities Compound Interest Nominal and Real Interest Rates Bond Valuation Stock Valuation How Common Stocks are Traded Estimating the Cost of Equity Capital Linking Stock Price and Earnings per Share Net Present Value Internal Rate of Return Alternative Investment Decision Rules

Exam Topics Include - 3 Capital Asset Pricing Model What Discount Rate to Use Risk and Return The Market Risk Premium Capital Asset Pricing Model Considerations Determining Beta Arbitrage Pricing Model Certainty Equivalents Why Manage Diversifiable Risk? Types of Risk Traditional Approach to Risk Management Enterprise Risk Management

Exam Topics Include - 4 Sensitivity Analysis Scenario Analysis Monte Carlo Simulation Real Options Decision Trees Market Values Economic Rents and Competitive Advantage Warren Buffet on Growth and Profitability Sources of Funds for Corporate Financing Internal financing Stock Debt

Pre-Exam Office Hours 311 Wohlers Hall Monday, March 5 3-4:30 pm