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FINA3331_Review for midterm 2 - • P/E ratios yield curves...

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FINA3331-Review Sheet for Midterm 2 The exam is closed notes and books, on chapters 7-15. 20 multiple choice questions (0.75points each). All of the multiple choice questions will be similar to those of your study guides with some changes in them (you need to know the topic). Correlation coefficient, number of stocks and portfolio diversification Optimal portfolio, in what area of the efficient frontier certain type(s) of investors will invest, finding portfolios that do not lie on the efficient frontier CAPM, APT and SML Intrinsic value and market value, P/E Investor sentiment and market risk premium and required rate of return, sector rotation, market timing Market efficiency and its forms, random walk hypothesis
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Unformatted text preview: • P/E ratios, yield curves and subsequent states of the economy • Life cycle approach and security analysis • The effect of changes in risk on the P/E ratio 4 Problems - (Each problem will be worth 1.25 points) 1. Expected return (when given states of the economy, probabilities that they will occur and the company’s return in each state) 2. CAPM 4. Stock valuation with constant dividend growth and zero growth (2 problems) Extra Credit-1 extra point on quantitative easing. What is it, how it is done and the effects it can have. Why other counties don’t like the quantitative easing done by our Federal Reserve Bank (i.e. how they will be affected by it)...
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