MGT 470 Final Exam Review
Question Types: Multiple choice, True/false w/ explanation, Short answer,
Short essay, Fill-in-the-blank
Problems: Multiple choice answer; must show all work / calculator inputs &
cash flow diagrams
Introduction
Describe the role of the financial system
Name the 6 parts of the financial system
Name the 5 core principles of Money & Banking
Chapter 2 Money & Payment System
There are 4 different definitions of liquidity; know each of them
Chapters 3 Financial Instruments, Market & Institutions
Explain the 4 fundamental factors the determine the value of securities
Chapter 4 Time Value of Money
Explain the concept of Time Value of Money
Types of Problems (work them any way you know how)
Find FV
Find PV
Find r
Find n
Annuities (ordinary & due)
→ Find PMT
Un-even cash flows
Perpetuities
EAR
Do all of the above using other-than-annual compounding
Perform All of the Above with Fractional (non-integer) Time Periods
Perform All of the Above in Cases Where Compounding Periods Per
Year Aren't Equal To Payments Per Year
Several basic problems
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MGT 470 Final Exam Review
Chapters 6 & 7
Concepts Questions:
Understand Bond Price Behavior wrt Changes in Market Interest Rates
Understand Bond Price Sensitivity wrt Maturity
Make Bond Investing Decision Using a Yield Curve Information
Types of Problems:
Find retail price of a bond
Calculator Financial Functions (at coupon) (no date given)
Bond Worksheet (between coupons) (date given)
Find bond YTM
Find holding period return
Chapter 8 Stock Market
Types of Problems:
Compute the value of a value-weighted portfolio
Chapter 9 Derivatives: Forwards, Futures, Options & Swaps
Concepts Questions:
Describe forward, future and option contracts
put and call options
Explain how to reduce risk or hedge with forward contracts
calculate margin account balances
Explain how to reduce risk or hedge with option contracts
calculate the “at the money” point
explain what market conditions would be advantageous to the writer
and buyer
Types of Problems:
Determine the “moneyness” of an option contract
Chapter 11 Economics of Financial Intermediation
Explain Information Asymmetry
adverse selection
moral hazard
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MGT 470 Final Exam Review
Chapter 14 Financial Regulation
Concepts Questions
Chapter 15 Central Banks
Concepts Questions:
List the objectives of central banks
maintain low and stable inflation
promote high, stable output and employment
maintain financial system stability
maintain interest rate and exchange rate stability
Understanding a Financial Crisis
Describe credit boom/bust
Describe asset price boom/bust
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MGT 470 Final Exam Review
Formulas
ROR = Profit/Investment = (Sales Price –COGS)/COGS = (End Price – Begin Price) /
Begin Price = (New – Old) / Old
Cost of Money
Nominal Interest Rate = r = r* + IP + DRP + LP + MRP
Time Value of Money
Discrete Compounding
rperiodic = rnominal/m
n=mxT
FV = PV(1 + rnominal/m)n
PV = FV / (1 + rnominal/m)n
EAR = (1 + rnominal/m)m – 1
PVperpetuity = PMT / rperiodic
Continuous Compounding
FV = PVerT
PV = FV / erT
EAR = er – 1
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