Multiple Choice, True/False Principles of Investing FIN 330 Phase 2 Exam Study Guide Multiple Choice, True/False

Chapter 1: Investing Basics Motivations for Investing Wealth creation: income v-v capital appreciation Financial security: deferring current consumption Retirement planning Difference between Real Assets and Financial Assets Motives for investing Setting investment objectives Importance of diversification Liquidity – what do we mean by and why it’s important Risk tolerance and age Dr. David P. Echevarria All Rights Reserved

Chapter 2: Investing Markets Market Functions Efficient Allocation of capital, Risk management, Efficient transfer of claims Primary Markets Investment Banker Functions Initial Public Offerings Shelf registrations Secondary Markets Trading in “seasoned” securities Providing liquidity, price information, costs Quotation levels Registered Exchanges v-v OTC markets Role of ECNs SEC Act of 1933 requirements Dr. David P. Echevarria All Rights Reserved

Chapter 3: Buying & Selling Full Service v-v Discount Brokers Difference between Cash and Margin accounts Settlement, stocks held in street name Initial margin, maintenance margin Types and functions of Orders Market, Limit, Stop, Trailing Round lots, block trade Long v-v Short Position expectations Importance of market indexes DJIA, S&P 500 Dr. David P. Echevarria All Rights Reserved

Chapter 4: Stocks (Equities) What does common stock represent? What are the stockholder’s rights? What are proxy statements? Dividend date information How do stock splits affect wealth? Characteristics of preferred stock How do we compute market capitalization? Growth v-v value stocks What are ADR’s?

Chapter 5: Fixed Income What are the major types of bonds? What is the purpose of the indenture agreement? What do we mean by the following: Serial Redemption Sinking Funds Callable bond Why are municipal bonds popular with certain investors? How do we measure Bond Yields? YTM, Current Yield, Coupon Yield, Yield-to-First Call How are interest rates and bonds prices related? Why are bond credit ratings important?

Chapter 6: Mutual Funds Open v-v Closed end funds, ETF’s Net Asset Value (NAV); Use? calculated? Funds performance v-v Indexes Fund objectives Advantages v-v Disadvantages of Mutual Funds Load v-v No-Load Funds Sources of advise on fund performance Dr. David P. Echevarria All Rights Reserved