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final exam guideline

# final exam guideline - j)= R rf β j(R m – R rf feasible...

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Final Exam Guideline The basic format of the exam will be the same as Exam 1. You will have 25 multiple choices and 5 problem solving/essay questions for 2 hour exam. You can use 1 page index card (front and back) for formula. Ch 7. Bond . Vb = ∑ CF / (1+ r) t = ∑ \$C / (1+ r) t + \$M / (1+ r) t . maturity, coupon, yield to maturity, par value, price . YTM = CY + CGY . interest rate risk vs. reinvestment risk . bond rating – default risk . yield to call . semi annual coupon bond Ch 12. 13. Risk and Return . Market efficiency . Expected rate of return . Standard deviation (σ) = √ ( ∑ (r i – r) 2 P i ) . Portfolio, Correlation coefficient . portfolio return, portfolio risk . Total risk = systematic risk + unsystematic risk . beta, market portfolio. . βportfolio = ∑ (percentage invested in stock j ) * β of stock j . Capital Asset Pricing Model (CAPM) : Security Market Line (SML) equation . Required rate of return = E(R

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Unformatted text preview: j )= R rf + β j (R m – R rf ) . feasible set, efficient frontier, capital market line Ch 8. Stock . Value of preferred stock . V ps = D / R ps or R ps = D / V ps . Constant growth model Vcs = D1 / (R-g) or R = (D1 / P ) + g . Non constant model . Reward to risk ratio . Ch 14. Cost of Capital . Tax effect . Cost of Debt Rd = Rd before tax * (1-Tax) . Cost of Preferred stock R ps = Div / price . Cost of Common equity-internal equity-external equity CAPM Rs = Rrf + b (Rm – Rrf) DDM Rs = (D1 / price) + g . WACC = wd * Rd (1-T) + wps* Rps + ws* Rs Ch 9. Capital Budgeting . Basic concepts and the benefits/costs of each method 1. Payback period 2. Discounted payback period 3. NPV = PV of CF – IO = [∑ FCF / (1+ R) t ] – Initial Outlay. 4. IRR : NPV=0 5. MIRR, PI . Reinvestment assumption of NPV and IRR GOOD LUCK!!!...
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final exam guideline - j)= R rf β j(R m – R rf feasible...

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