FINC 4331 Review for Final Exam Spring 2008

FINC 4331 Review for Final Exam Spring 2008 - 225). The...

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FINC 4331 Review for Final Exam The final exam will be held during the regular class time. It will cover Chapters 6 and 7 in the textbook and your notes from class. You can use one 8.5x11 sheet of paper with notes on one side when taking this test. You can also use your calculator manual -- for the test, be sure to bring a calculator . Chapter 6 As we discussed in Chapter 3 and in class, please understand the preferences of different agents for capital (for example, shareholders versus depositors). Understand how taxes might influence a firm’s capital structure choice (debt vs. equity). Understand how agency costs might influence a firm’s capital structure choice (debt vs. equity). Understand how & why equity-to-asset ratios changed after FDICIA in 1991. Understand what regulators consider to be Tier 1 and Tier 2 capital, and their components. Understand what regulators consider to be the different levels of “capital adequacy.” Understand how to calculate a bank’s risk-based assets and the capital ratios in Table 6.2 (pg.
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Unformatted text preview: 225). The book example on page 226+ is pretty good. Understand a few criticisms of Basel I (these are in the chapter questions, below, as well). Understand what your book discusses as the proposed pillars of Basel II. Understand what is meant by operational risk. Please be able to answer all of the questions on page 239 of your book. Also, be able to work through the solutions to the chapters Problems 1-3 . Chapter 7 Understand how loans are securitized (as in Figure 7.1). Understand what is meant by structured transactions in the book, as well as the examples they list there. Understand how banks can sell loans (or participations), and how the Enron case relates to this. Understand the Internet bank phenomenon and what advantages or disadvantages it offers. Understand how banks influence the electronic payment system and their role in e-commerce. Please be able to answer the questions on page 261....
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