MGT 470 Test 1 Review 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 Introduction  Describe the role of the financial system  Name the 6 parts of the financial system  Name the 5 core principles of Money & Banking Chapter 2  There are 4 different definitions of liquidity; know each of them Chapters 3  Explain what a financial instrument is and what it is used for  Explain the difference between Underlying and derivative financial instruments  Explain the 4 fundamental factors the determine the value of securities  Explain the role of financial markets  Explain the role of financial institutions

MGT 470 Test 1 Review 2 Chapter 4  Explain the concept of Time Value of Money 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  EAR  Do all of the above using other-than-annual compounding  Perform All of the Above with Fractional (non-integer) Time Periods  Perform All of the Above in Cases Where Compounding Periods Per Year Aren't Equal To Payments Per Year  1 basic problem and 1 advanced problem

MGT 470 Test 1 Review 3 Chapters 6 & 7 Concepts Questions:  Understand Bond Price Behavior wrt Changes in Market Interest Rates  Understand Bond Price Sensitivity wrt Maturity  Make Bond Investing Decision Using a Yield Curve Information Types of Problems:  Find retail price of a bond  Calculator Financial Functions (at coupon) (no date given)  Bond Worksheet (between coupons) (date given)  Find bond YTM  Find holding period return Chapter 9 Concepts Questions:  Describe forward, future and option contracts  put and call options  Explain how to reduce risk or hedge with forward contracts  calculate margin account balances  Explain how to reduce risk or hedge with option contracts  calculate the “at the money” point  explain what market conditions would be advantageous to the writer and buyer Chapter 11  Name the 6 major points of the role of financial intermediaries  Explain Information Asymmetry  adverse selection  Moral hazard

MGT 470 Test 1 Review 4 Formulas 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 r periodic = r nominal /m n = m x T FV = PV(1 + r nominal /m) n PV = FV / (1 + r nominal /m) n EAR = (1 + r nominal /m) m – 1 PV perpetuity = PMT / r periodic Continuous Compounding FV = PVe rT PV = FV / e rT EAR = e r – 1