1. Know the basic definitions and features of options. For example, in-the-money, at-the-money, out-of-the-money, intrinsic value, time value, payoff diagrams, profit position diagrams, break-even point for an option and/or stock position, and maximum loss or gain for an investment position including options.

2. Be able to consider a multiple option position, such as a put and a call, puts and calls with different strike prices, etc. Know the six input factors that affect put and call option prices and whether they are positively or negatively related.

3. Understand the concept of delta for a call or a put. What are the relevant ranges of delta for a call or a put? Be able to use the concept of position delta.

4. Understand the concept of put/call parity.

1. Understand the concept of duration and the relationship with price volatility. Be able to sort out a list of bonds according to their duration. Be able to use duration to estimate a percent price change in a bond.

2. Understand the concept of convexity. Be able to use convexity and duration to better estimate the percent change in a bond.

3. Understand the concept of immunization. What is it and how do you use it?

1. How do you calculate beta? How would you find the beta of a portfolio of stocks? What does beta measure?

2. What is important in choosing stocks if you have a dual goal of minimizing the portfolio variance and maximizing the expected return?

3. Understand the concept of MPT and the opportunity set, efficient frontier, etc.

4. Know how to apply MPT concepts to create a diversified portfolio (practical application).

5. Know how to apply the different concepts of stock valuation. For example, how do you use the dividend discount model and the same model using FCFE (how is this use of the model different?). Know the pitfalls of applying these models (especially the recommendations in the handouts).

6. Know how to use P/E ratios and PBV ratios to value stocks. Recognize how these relate to the dividend discount models. Again, know the pitfalls of applying these models and the recommendations in the handouts.

1. What limit orders are similar to option positions and vice versa?

2. Know the key features of a dealer, broker, direct search, and auction markets.

3. What is a bid-ask spread?

4. Sort out the definitions of systematic, unsystematic, diversifiable, non-diversifiable, unique, firm-specific, and market risks.

5. Be able to calculate forward interest rates. Define forward rates.