CHAPTER1 Definitions: Assets, liabilities, equity, financial leverage, valuation, risk and return . Divisions of finance (3 areas) .Goal of financial manager Risk and return tradeoff Two sources of external capital CHAPTER 2 Definitions: liquidity, CDs, US T-bll, repurchase agreement and banker acceptance Interest definition and role Term structure of interest rates-positive and negative relationship between time and interest rates (upward vs downward sloping curve is caused by inflation vs deflation) Purposes of financial markets Difference between primary and secondary markets what type of loans to commercial banks like (ST and liquid) . . CHAPTER 4 Definitions: bid & ask prices, spread, market / limit orders, GTC orders, street name, long/short position Know margin formula and how to solve margin problems similar to end of chapter . Short selling know what it is and how to solve short selling problems similar to end of . Efficient market hypothesis know what it states in terms of asset prices and whether problems chapter problems investors can consistently beat the market CHAPTER5 Definitions: Monetary policy, Board of governors, Fed funds rate, Discount rate, Fiscal policy, deflation How is money created in our system through fractional reserve banking (primarily by depositing money in banks and the banks lending the money out minus their reserve requirements) Monetary policy tools (reserve requirement, discount rate and target fed funds rate and open market transactions) . . How does the FED expand and contract the money supply through the use of . mpact of Fiscal policy on credit markets (how is a surplus or deficit created - when Fiscal and monetary tools for fighting inflation (fighting inflation the fiscal tool is raising buying/selling US govt. securities and raising/lowering reserve requirements expenditure > or