1. FIN220 2nd Midterm Review

2. Chapter 5 Time Value of Money
Time lines
Future values (FV)
Simple vs. compound interest
Compounding
Present values (PV)
Discounting
Finding annuity payments, periods, and interest rates
Ordinary annuity
Annuity due

3. Chapter 5 Time Value of Money
Perpetuities
Uneven cash flow
Future value of an uneven cash flow stream
Compounding periods
Semiannual and other
Comparing interest rates
Nominal interest rate (APR)
Effective Annual Rate (EAR or EFF)
Fractional time periods
Amortized loans

4. Chapter 7 Bonds & Their Valuation
Who issues bonds?
Treasury bonds
Corporate bonds
Foreign bonds

5. Chapter 7 Bonds & Their Valuation
Key characteristics of bonds
Par value
Coupon interest rates (Fixed-rate, Floating-rate, Zero-coupon)
Maturity date
Other features
Convertible bonds, Warrants, Putable bonds, Income bond, Indexed bond, Call provisions & Sinking funds
Bond valuation
Discount bond Vs. Premium bond
Bond yields
Current Yield , Capital Gain Yield & Yield to maturity (YTM)
Yield to call (YTC)

6. Chapter 7 Bonds & Their Valuation
Changes in bond values over time
Bonds with semiannual coupons
Assessing a bond’s riskiness
Price (Interest rate) risk
Reinvestment rate risk
Default risk
Various type of corporate bonds
Mortgage bonds, Indenture, Debenture & Subordinated debenture
Bond ratings
Bond rating criteria
Investment-grade bond Vs. Junk bond
Bankruptcy & reorganization