Chapter 5 Compound interest Compute simple Present Values and Future values Compute Present Values and Future values of Annuities Interest rate interpretations Chapters 2 and 6 What are Financial Markets? Why do they exist? What are the different methods by which funds transfer takes place? Types of financial assets: Primary markets vs. Secondary markets Money markets vs. Capital markets Organized security exchanges vs. Over-the-counter markets The Investment Bankers and their functions The financial intermediaries and their role in the financial markets Compare and contrast the financial intermediaries with investment bankers. Determinants of market interest rates (cost of money) Fishers equation and the risk premia (Inflation, Default, Liquidity, and maturity) Define and understand how the premia are set in the market The terms structure of interest rates and yield curve The shape of yield curve and its interpretations Chapter 7 Who issues Bonds? Treasury bonds Corporate Bonds Municipal Bonds Foreign Bonds Characteristics of Bonds Par value Coupon interest rate Maturity Indenture Call provisions Sinking funds Callable bonds and convertible bonds Types of Corporate Bonds: Debentures Subordinated Debentures Mortgage Bonds Junk Bonds

Bond ratings Valuation of bonds: Calculation of intrinsic/economic value Computing the YTM for bonds Where are bonds traded? Chapter 9 Common stock: properties Features of common stock (CS) Control of the firm: Voting rights Preemptive rights Types of common stock: Types of stock market transactions: Types of markets Common stock is traded in Valuation of common stock Multi-period model with constant growth Characteristics of preferred stock Valuation of preferred stock Chapter 10 The concept of cost of capital: its relationship to the IRR of a project Know how to compute the cost of Debt Preferred stock Old common stock (retained earnings) using DCF model and the risk premium approach New common stock (and why is this different from the cost of retained earnings) Factors determining the cost of capital sources Effect of tax on the individual costs of the various sources of financing. Be able to compute the WACC of a project and compare it with the IRR. Advantages and limitations of Cost of capital approach. Chapter 11 Computations of payback and discounted payback for the project; Computations of the NPV for a project; When would one accept a project? What are the advantages of NPV vs. payback or discounted payback What is the relationship between NPV and IRR Computations of the IRR for a project using tables for even cash flows; When would one accept a project?