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

2. 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
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3. 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

4. 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

5. 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?

6. 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?

7. 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