Finance 3101: Key Questions
1. What does Financial Management involve?
2. What is the “Cycle of Money”?
3. How do lenders and borrowers benefit from financial intermediaries?
4. What are the four major areas of Finance?
5. What are the four types of markets for financial assets?
6. What are three ways of classifying financial markets?
7. What are the three main questions financial managers must answer?
8. What is the overriding goal of financial managers?
9. What are the five major determinants of stock prices and which are unambiguous in their impact on stock prices?
1. What are the principal financial statements and what ...view middle of the document...
What does the interest rate represent—in general, to lenders and to borrowers?
2. What is the difference between nominal and real interest rates?
3. What does the Fisher Effect say about inflation and nominal interest rates?
4. What are the four main components of the nominal interest rate and what has been their relative importance historically?
1. What type of financial transaction involves bonds?
2. What are the forms of future cash flows from a bond and what types of cash flow patterns do they represent?
3. How many bond pricing and yield formulas are we using and when would each be used?
4. How are bonds classified based upon whether their market price is above, below, or equal to par value?
5. What is the relationship between price and par value on the one hand and YTM and coupon rate on the other?
6. What is the relationship between bond prices and interest rates and what are the two characteristics of bonds that provide a gauge of price sensitivity to changes in market interest rates?
1. What type of claim does a share of stock represent and why is this the case?
2. How do equities differ from bonds for both investors and issuers?
3. What are “Bear”, “Bull” and “Efficient” markets?
4. Future cash flows from equities take what forms?
5. What are our two stock pricing formulas and when would each be used?
1. How do we standardize returns across investments of different amounts?
2. How do we standardize returns across investments of different time periods?
3. What do we mean by “uncertainty”?
4. How have historical returns and risk compared across asset classes?
5. What is a “weighted average” and how many of our formulas involve a weighted average?
6. What are the two major types of risk ?
7. What is the measure of total risk and systematic risk?
8. How can diversification reduce total risk and what is the key statistic involved?
9. What is the commonly-used model for relating required returns and risk and what is the key equation involved?
1. What is the central question with which this chapter deals?
2. What decision by IBM is considered to be one of the greatest financial mistakes in history?
3. What was IBM’s mistaken assumption and what part of the capital budgeting decision was affected?
4. What are the two principal capital budgeting techniques and how are they related?
5. How do we calculate NPV and IRR and in what units are they expressed?
6. What is a more generic way of describing the IRR?
7. What should be used as the discount...