HFT 4464 Final Exam Review Fall 2008 Final

HFT 4464 Final Exam Review Fall 2008

Final Exam is Cumulative • Chapter 1 through Chapter 10 • 50 Multiple Choice Questions – Vocabulary oriented – Problems

Chapter 1 • Vocabulary – Advantages / disadvantages of organizational structures – Definition of financial management – Agency relationship

Chapter 2 • Stock trading – Primary market – Secondary market • Calculate holding period return • How to read a bond quotation • Advantages / Disadvantages – Bonds – Preferred stock – Common stock

Chapter 3 • Classes of ratios • Ratio calculations – P/E – EPS – Turnover – Current & Quick ratio – Times interest earned

Chapter 4 • Vocabulary – What is risk – Risk aversion • Expected return • Return variance • Standard deviation

Chapter 5 • Time value of money – Future value of a lump sum investment • Table p. 91 – Present value of a lump sum payment • Table p. 93 – Future value of a series of payments made • Table p. 96 – Present value of a series of payments received • Table p. 102

Chapter 6 • Vocabulary – Indenture – Debenture – Subordinated/Unsubordinated – Senior/Junior

Chapter 6 • Yield to maturity of a bond (calculation) • Value of preferred stock – V = D/I – Other formats

Chapter 6 • Bond Market Rate vs. Coupon Rate – Market Rate > Coupon Rate • Bond Value is ? Par value – Market Rate = Coupon Rate • Bond Value is ? Par Value – Market Rate < Coupon Rate • Bond Value is ? Par Value

Chapter 7 • Vocabulary – Common stock features – Pro & Cons of common stock financing

Chapter 8 • Cost of Capital – Cost of debt – Cost of preferred stock – Cost of external equity – Weighted Average Cost of Capital

Chapter 9 • Capital Budgeting • Calculate Net Investment for a project • Calculate Net Cash Flows for a project • Vocabulary – Independent / Mutually Exclusive projects – Opportunity / Sunk Costs – Project Purposes • Growth • Reduce costs • Legal requirements

Chapter 10 • Capital Budgeting – Payback period – Discounted payback period – Net present value – Profitability index – Internal rate of return

Summary • Scantron required !!! • Present / future tables provided • Bring a calculator !!! (And maybe a spare? ) • Scratch paper provided • Formula sheet will be provided for calculations