Ch 1

Ch 1
Questions 1, 2, 8 and 11. Page 23-24
These are very simple questions and should take 5-10 minutes

The important topics in this chapter include
� Different types of markets (primary, secondary, derivatives, money and capital markets, Forex, IPO etc.)
� Types of Financial institutions
� Ways to transfer money (flow of funds)
� Different types of risks

Ch2
Questions 2 a,,2d, 3e, 4 a, 4d, 5d, 12, 20, 21, 28, 30

The important topics in this chapter include
� Time value of money (finding PV, FV, PV and FV of annuity, EAR i.e. effective annual rate) In the book they use the formulas of tables. You may and should use financial calculators and/or excel. Those of you who have taken any classes with me know how to use a financial calculator. Understand the formula as explained in the book but make life easier using financial calculator or excel. If you don’t know how to use either of the two I can post a “how to use” on the web and we can have a chat session as well.
� How are interest rates determined (loanable funds theory)
� Interest rates fro individual securities (fisher effect, default risk,
liquidity risk etc.)
� Term structure of interest rates (expectations theory, liquidity premium theory)

Ch3
Questions 1, 2, 8, 11b, 19, 20
The important topics in this chapter include
� Various interest rate measures or different between required, expected realized rate of return
� Bond valuation (if you have done 630 and especially 634 with me this should be a breeze) with duration and convexity.

Ch4
Questions 10, 15

Chapter 4 is a discussion chapter that discusses the Federal reserve system and impact of monetary policies on interest rates read this chapter carefully.