1. How does adding stocks to a portfolio affect its volatility?
2. What is the efficient frontier?
3. What is the Sharpe ratio, and what does it measure?
4. How does beta affect an investments cost of capital?
5. How are the capital market line and security market line similar? How are they different?
6. Explain the difference between financial risk and business risk? What factors inuence a rms business and financial risk?
7. There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work?
8. Stockholders can transfer wealth from bondholders through a variety of actions. List and explain three (3) key actions that stockholders can take to transfer wealth from bondholders.
9. Explain what capital structure theory attempts to do and demonstrate useful lessons that can be learned from capital structure theory.
10. Using the free cash flow valuation model, identify avenues by which capital structure can affect the weighted average cost of capital and firm value.
11. Explain the difference between financial risk and business risk? What factors influence a firms business and financial risk?
12. There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work?
13. Stockholders can transfer wealth from bondholders through a variety of actions. Explain three (3) key actions that stockholders can undertake to transfer wealth from bondholders.
14. Identify five (5) features that distinguishes Finance lease from Operating Lease
15. There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work?
16. There are some corporate strategists who have suggested that firms focus on maximizing market share rather than market prices. When might this strategy work, and when might it fail?
17. It is often argued that managers, when asked to maximize stock price, have to choose between being socially responsible and carrying out their fiduciary duty. Do you agree? Can you provide an example where social responsibility and firm value maximization go hand in hand?
18. There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work?
19. There are some corporate strategists who have suggested that firms focus on maximizing market share rather than market prices. When might this strategy work, and when might it fail?
20. It is often argued that managers, when asked to maximize stock price, have to choose between being socially responsible and carrying out their fiduciary duty. Do you agree? Can you provide an example where social responsibility and firm value maximization go hand in hand?
21. Why might the two (2) disciplinary mechanisms of shareholders against managers not work?
22. What are convertible bonds? How do they protect bondholders against expropriation by stockholders.
23. As a consultant of ABC Company, you are requested to answer the following, providing concise explanation.
24. How do you calculate a portfolio return?
25. Conceptually, how are covariance and correlation different?
26. How does adding stocks to a portfolio affect its volatility?
27. What is the efficient frontier?
28. What is the Sharpe ratio, and what does it measure?
29. What is the minimum variance Portfolio?
30. How does beta affect an investments cost of capital?
31. Is the market portfolio efficient? Justify your answer.
32. How are the capital market line and security market line similar? How are they different?
33. Differentiate between the Capital Market Line and the Security Market Line
34. Differentiate between systematic and unsystematic Risk
35. Stockholders can transfer wealth from bondholders through a variety of actions. How would the following actions by stockholders transfer wealth from bondholders?

• An increase in dividends
• A leveraged buyout
• Acquiring a risky business
• How would bondholders protect themselves against these actions?

36. Stockholders transfer wealth from bondholders through the following three (3) means. Explain how. In what ways can bondholders protect themselves against these actions?

• An increase in dividends
• A leveraged buyout
• Acquiring a risky business