Download Final Study Guide

Summer 2008
Dr. Leon
MBAD/F 619 FINAL EXAM STUDY LIST
1. Input Distribution Modeling:

Be able to describe the biases that experts may have in defining distributions;
describe techniques that can be used to minimize these biases when you are
soliciting an expert opinion.

Know how to perform regression analysis to forecast growth rates and % of sales
estimates; know how to interpret the output, derive input distributions and program
the distributions in a proforma model. Be able to explain the potential accuracy of
the distribution by referring to R-sq.
2. Portfolio Models:

Know how to calculate the annual returns, mean and standard deviation of the
returns for a stock.

Know how to calculate the expected return and standard deviation for a two-asset
portfolio.

Know how to calculate an envelope portfolio for a given risk-free rate and a set of
n assets.

Know how to calculate the efficient frontier as a convex combination of two
envelope portfolios.

Understand the principle of portfolio diversification and the efficient frontier.
3. Simulating Stock Prices and Financial Options:

Be able to calculate historical and implied volatility for an option; explain the
difference between historical volatility, implied volatility and expected volatility.

Be able to use the Black-Scholes VBA macros to value a call or a put option.

Be able to create a simulation model to program, simulate and analyze the return
for a given portfolio of stocks and financial options. This includes being able to
program the lognormal distribution for future stock prices. Be able to
communicate the risk associated with the portfolio in a managerial context.

Understand how financial options can be used to protect the value of a portfolio.
4. Spreadsheet Management

Please see exam question in Blackboard’s Assignment section