Chapter 1 - Introduction

• Define the term investments.
• What are some of the benefits of investing?
• Discuss how investments are created in the financial markets.
• In the financial markets, who are the typical users (demanders) of funds? Who are the typical suppliers of funds?
• Describe some dimensions that distinguish various financial markets and investments.
• What are the three major categories of investments created in the financial markets?  What are their major characteristics?
• What is the role of financial intermediaries in the financial markets?  How do they contribute to the diversity of investments available?
• What are the steps involved in the investment process?
• What are some of the factors that constrain investors? choice of investments?
• What are typical investment goals for individuals?
• What are the only two sources of return for any kind of investment?   How are these taxed?
  

Chapter 2 - overview of securities

• Describe the claim on income and assets for both bondholders and equity holders
• Who are the major issuers of bonds? What is the distinguishing feature of each of these issuers?
• Why were U.S. government agencies established?
• Why is the interest rate on agency bonds a bit higher than treasury securities?
• What are the rights given to owners of stock?
• Define the four key dates related to dividend payments of corporations.
• Identify each of the items in a stock quote (see Yahoo! Finance)
• What are some general classifications of stock investments?

Chapter 3 - economy

• What are the steps involved in a top-down investing approach?
• How are US companies affected by a weakening US dollar?
• What are some of the items that affect the level of economic growth?
• What two approaches can the government use to affect the economy?
• How might a federal budget deficit affect the level of interest rates in the economy?
• What are three goals of the government when establishing fiscal and monetary policy to manage the US economy?
• What are the different stages of the business cycle?
• Describe the investment strategy called sector rotation.
  

Chapter 4 - individual security risk and return

• What are the two sources of any investment return?
• What distinguishes dollar and percentage returns?
• What are realized and unrealized capital gains?  How do they affect returns?
• What are two ways to annualize holding period returns?
• When is HPR inadequate when measuring returns and how does internal rate of return correct these errors?
• Distinguish arithmetic and geometric average return.  When should each be used?
• Provide a very general overview of the historical returns of asset classes.  (Specific numbers are not necessary, just a loose ranking of asset classes).
• Why do investors demand higher return for taking on more risk?
• What are the advantages and disadvantages of buying stock on margin when compared to purchasing a stock outright? 
• When does an investor receive a margin call?