FIN335 SP2012 Phase 3 Review

40 Questions 30 M/C, 10 Problems

Capital Market History [Ch. 10]

1. How do we compute? dollar returns, percentage returns (P)

2. How do average returns differ from geometric returns? (P)

3. What are risk premiums? How do they affect expected returns?

4. How do we measure expected returns using the CAPM? (P)

Risk and Return [Ch. 11]

1. How do we measure expected returns for portfolios? (P)

2. How do we measure portfolio beta? (P)

3. Why should investors hold a portfolio of assets?

Cost of Capital [Ch. 12]

1. Why are taxes important in determining the cost of capital?

2. How do we measure the weighted average cost of capital? (P)

3. How does risk impact the firm’s cost of capital?

4. How are weights determined when computing the weighted average cost of capital? (P)

Leverage and Capital Structure [Ch. 13]

1. What is the essence of Modigliani & Miller Proposition 1?

2. How do taxes affect the cost of debt?3. What is financial risk? Operating

Risk?4. What is business risk?5. How does risk affect the cost of

capital?

Dividends and Dividend Policy [Ch. 14]

1. What are the 4 important dates regarding the payment of dividends?

2. What does it mean when a stock goes ex-dividend? (P)

3. How do stock splits affect shareholder wealth? (P)

4. How do dividends relate to stock prices?

5. What are dividend clienteles?

Raising Capital [Ch. 15]

1. What functions do venture capital firms perform?

2. How is the registration statement and preliminary prospectus related?

3. What are the two types of underwriting agreements and how do they differ?

4. What are green shoe provisions?5. What are lockup agreements?

International Financial Management [Ch. 18]

1. How does a direct exchange differ from an indirect exchange? (P)

2. How can we compute a cross rate for a third given two cross rates? (P)

3. How does a spot trade differ from a forward?

4. What is a swap? 5. What is an ADR? How does an ADR come

into being?6. How do we recognize when a currency is

appreciating? Devaluing?

Supplementary Material

1. Bankruptcy and Reorganization (Supplementary Notes)

a. What does it mean to reorganize a firm in bankruptcy?

b. What is the Rule of Absolute Priority?c. How does Chapter 11 differ from Chapter 7?