Dr. P.V. Viswanath



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Frequently Asked Questions

MBA 632: Managerial Finance


Q. What can you tell us about the quizzes?
Ans.  The first quiz will be on chapters 1 through 3. They will cover three parts -- first, definitions; second, short questions; third, short problems. All the questions that are eligible for inclusion can be found in the webnote "Important Terms and Concepts."

Q. What do I have to study for the Midterm?
A. One, definitions from chapters 1, 2, 3, 6 (I am not going to ask definition questions on Chapter 7).
Two, critical thinking questions from chapters 1, 2, 3, 6 (I am not going to ask critical thinking questions on Chapter 7)
Three: problems similar to end-of-chapter problems from chapters 3 (problems 26-43), 5 (problems 29-56), 6 (problems 1-14, 15, 16, 17, 18, 21) and 7 (problems 13-18 and 20).

Give us a sample midterm.
A. Here is one:

1. Definitions:
Define the following terms -- agency costs, operating cash flow, profit margin, bid price, sinking fund.

2. a. Is an IPO a primary market transaction or a secondary market transaction?
b. How are auction markets like the NYSE different from dealer markets?
c. Under standard accounting rules, is it possible for a company's liabilities to exceed its assets? If this happens, is the company bankrupt?
d. What information does the capital intensity ratio provide about a firm?
e. How does a bond issuer decide on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required rate of return on a bond?

3. Chapter 3, problem 29 (p. 82); Chapter 5, problem no. 48 (p. 149); Chapter 7 problem 15 (p. 219).

Q. Are the exams open book or closed book?
Ans. The midterm and the final exams are closed book; however, you can bring in one 8.5x11 sheet, which can contain only formulas. You may write on both sides of the paper.  However, you may not staple several sheets of paper together.  Going through your notes probably cannot make up for the lack of a proper understanding of the material.

The short quizzes are closed book; you may not bring in any sheets either.

Q. What do I have to study for the final exam and what will be its format?

A. Chapter 8 will be included for the final, as will chapter 9. However, you are also responsible for Chapters 10 and 11. You will not be responsible for computing portfolio variance or computing portfolio expected return or computing standard deviations of returns and mean returns from sample return data. However, you will be responsible for knowing the concepts in these chapters.

For example, you have to know the following concepts:

  • Market efficiency
  • Diversification.
  • Systematic and Unsystematic Risk
  • Systematic Risk and Beta
  • The Security Market Line
  • The SML and the cost of capital

You have to know all the critical thinking and concept review questions in Chapter 10 and chapter 11. In Chapter 10, you need to know all the sections 10.1 to 10.5. However, in section 10.4, you can skip the computation of standard deviation. In Chapter 11, you must know the following sections: 11.3 to 11.8.

As far as quantitative and computational questions from Chapters 10 and 11, you only need how to compute returns (that's too basic; you cannot have taken MBA 632 and not know that), to know the CAPM formula, and how to apply it.

The format of the Final will be as follows:

  • Definitions (from Chapters 8-11)
  • Short questions (critical thinking and concepts review, from chapters 8-11)
  • Quantitative Questions (Chapters 8-11); there will be at least one question from Chapters 8/9 and one from Chapter 10/11; there may be more.

Q. Can I do extra work to improve my grade?
Ans. Sorry. I believe that in order to be fair, I have to give every student the same opportunity to do extra work. Obviously, this is not feasible.  However, on occasion I will allow you to resubmit an assignment for grade improvement.

Q. What can I do to check my understanding of the material and to prepare for the exams?

  • You can do the problems from the end of each chapter. The answers can be found on the Web (see Blackboard).
  • You can try to answer the questions at the end of media articles.
  • You can read current newspaper and magazine articles on relevant topics and make up your own questions and articles.

Q. What do I have to study from each chapter?
Ans. In each chapter, you should know the definitions and the meanings of key terms, and be able to put them into context. You should also look at the end-of-chapter problems.

Updated September 23, 2003.


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