1. Dr. David P EchevarriaAll Rights Reserved1 FIN335 Phase 3 Spring 2011 Study Guide Cameron School of Business UNC Wilmington

2. Dr. David P EchevarriaAll Rights Reserved2 Capital Market History [10] (P) 1.How do we compute? dollar returns (P), percentage returns (P), capital gain (loss) (P) 2.How do average returns differ from geometric returns? (P) 3.What are risk premiums? How do we compute them? 4.What important claim does the Efficient Markets Hypothesis make about securities markets?

3. Dr. David P EchevarriaAll Rights Reserved3 Risk and Return [11] (P) 1.How do we compute the expected return for a stock given alternative future market scenarios? 2.How do we compute the expected return for a portfolio? (P) 3.How do we compute the beta for a portfolio? (P)

4. Dr. David P EchevarriaAll Rights Reserved4 Cost of Capital [12] (P) 1.Why are taxes important in determining the cost of debt? 2.How do we measure the weighted average cost of capital? (P) 3.Why is the WACC important when considering new investment projects? 4.How does risk impact the firm’s cost of capital?

5. Leverage and Capital Structure [13] 1.What is financial leverage? Financial risk? 2.How does business risk differ from financial risk? 3.Why is the interest tax shield important to the firm? 4.What is Operating Leverage? Dr. David P EchevarriaAll Rights Reserved5

6. Dr. David P EchevarriaAll Rights Reserved6 Dividends and Dividend Policy [14] 1.What are the 4 important dates regarding the payment of dividends? 2.What is a dividend? Why do companies pay them? 3.What does it mean when a stock goes ex-dividend? When does a stock sell ex-dividend? 4.What are dividend clienteles? 5.What effect do stock splits have on the equity accounts?

7. Dr. David P EchevarriaAll Rights Reserved7 Raising Capital [15] 1.What functions do venture capital firms perform? 2.How are the registration statement and preliminary prospectus related? 3.What functions do underwriters perform? 4.What is a “red herring”? 5.What are the two types of underwriting agreements and how do they differ? 6.What are green shoe provisions? What is a lockup agreement?

8. Dr. David P EchevarriaAll Rights Reserved8 International Aspects of Financial Management [18] (P) 1.What is an ADR? 2.What is the LIBOR? 3.What is a spot exchange? 4.How much of our currency would it take to buy a foreign currency and vice versa (P) 5.How does a direct exchange differ from an indirect exchange? (P) 6.How does a spot trade differ from a forward trade? 7.What information does the Cross-Rate table give us? 8.What is a currency swap?