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Principles of Investing FIN 330

Principles of Investing FIN 330. Phase 3 Exam Study Guide 4 0 Multiple Choice Chapters 14, 15, 17-19, 22. Chapter 14: Options (8). How are options used to; Protect a long stock position Protect a short stock position How do Calls differ from Puts ?

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Principles of Investing FIN 330

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  1. Principles of InvestingFIN 330 Phase 3 Exam Study Guide 40 Multiple Choice Chapters 14, 15, 17-19, 22

  2. Chapter 14: Options (8) • How are options used to; • Protect a long stock position • Protect a short stock position • How do Calls differ from Puts? • What bets are the buyers making? The sellers? • Principal characteristics • What are LEAPS? Maximum maturity? • What does it mean to be; Calls? Puts? • In the money, at the money, out of the money • What is a naked call writer?

  3. Chapter 15: Futures (8) • What does it mean to be long a futures position? Short position? • How do you hedge a long asset position? A short asset position? • What is marking-to-market? How does it lead to a margin call? • What is a cash market? Forward market? • What is basis? How is basis measured? • How do swaps work? Plain vanilla? Callable? Putable? Users? • What is the expectation of a vanilla swap? • When would an institution exercise a swap agreement? • Callable • Putable

  4. Chapter 17 MPT / CAPM (8) • What is risk-aversion? Effect on investor behavior • What does MPT tell us about managing risk and diversification? • How do we compute expected returns? • What is the Capital Asset Pricing Model? • How does CAPM describe the efficient frontier? The role of Beta? • How do we measure excess return? • The difference between the CML and the SML

  5. Chapter 18 Bond Portfolios (4) • How do changes in the YTM affect bond prices? • What is Duration? • What are the determinants of duration? • How do changes in YTM affect duration for any given bond? • How does the frequency of coupons change duration?

  6. Chapter 19 Int’l Investing (4) • What do investors hope to see in terms of the correlation between US and foreign securities markets? • How do currency fluctuations affect the return on foreign investments? • What are some of the key problems in investing directly in foreign securities? • What is an ADR? How and why is it used?

  7. Chapter 22: Evaluating Portfolio Managers (8) • How does a fund’s Beta differ from its Standard Deviation? • There are three approaches to measuring a portfolio’s return in terms of riskiness: Sharpe, Treynor, and Jensen (a) • How does each measure Excess Return? • Why are benchmarks important? • Why is diversification important? • What are the main considerations when evaluating portfolio managers?

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