1. Dr. David P. EchevarriaAll Rights Reserved Slide 1 Principles of Investing FIN 330 Phase 1 Exam Study Guide Chapters 1 – 4, 9, 10

2. Dr. David P. EchevarriaAll Rights Reserved Slide 2 Chapter 1 Motivations for InvestingMotivations for Investing –Wealth creation: income v-v capital appreciation –Financial security: deferring current consumption –Retirement planning Real Assets v-v Financial AssetsReal Assets v-v Financial Assets Risk – definition, how we characterize itRisk – definition, how we characterize it –Importance of diversification Liquidity – what and why it’s importantLiquidity – what and why it’s important Risk tolerance and ageRisk tolerance and age

3. Dr. David P. EchevarriaAll Rights Reserved Slide 3 Chapter 2 Market FunctionsMarket Functions –Transparency, Liquidity, Information, Efficient Primary MarketsPrimary Markets –Investment Banker Functions –Initial Public Offerings Secondary MarketsSecondary Markets –Trading in “seasoned” securities –Providing liquidity, price information, costs Registered Exchanges v-v OTC marketsRegistered Exchanges v-v OTC markets Role of ECNsRole of ECNs SEC Act of 1933 requirementsSEC Act of 1933 requirements

4. Dr. David P. EchevarriaAll Rights Reserved Slide 4 Chapter 3 Full Service v-v Discount BrokersFull Service v-v Discount Brokers Difference between Cash and Margin accountsDifference between Cash and Margin accounts –Settlement, Street name (margin) Types and functions of OrdersTypes and functions of Orders –Market, Limit, Stop Long v-v Short Position expectationsLong v-v Short Position expectations Importance of market indexesImportance of market indexes –DJIA, S&P 500

5. Dr. David P. EchevarriaAll Rights Reserved Slide 5 Chapter 4 Open v-v Closed end funds, ETF’s Open v-v Closed end funds, ETF’s Net Asset Value (NAV); Use? calculated? Net Asset Value (NAV); Use? calculated? Funds performance v-v Indexes Funds performance v-v Indexes Fund objectives Fund objectives Advantages v-v Disadvantages of Mutual Funds Advantages v-v Disadvantages of Mutual Funds Load v-v No-Load Funds Load v-v No-Load Funds Sources of advise on fund performance Sources of advise on fund performance

6. Chapter 9: Efficient Markets What is the Efficient Markets Hypothesis? What is the Efficient Markets Hypothesis? The Principal Implication of EMH? The Principal Implication of EMH? What are the Three Forms of Efficiency? What are the Three Forms of Efficiency? How do we define Abnormal Returns? How do we define Abnormal Returns? How does Fundamental Analysis help market efficiency? How does Fundamental Analysis help market efficiency?

7. Chapter 10: Technical Analysis What are some of the principal indicators in technical analysis?What are some of the principal indicators in technical analysis? What does it mean to be a “contrarian”?What does it mean to be a “contrarian”? What is momentum?What is momentum? What do the following terms indicate to technical traders:What do the following terms indicate to technical traders: –Support level –Resistance level What is a self-fulfilling prophecy?What is a self-fulfilling prophecy? Dr. David P. EchevarriaAll Rights Reserved Slide 7