The Investment Advisor Body of Knowledge + Test Bank. IMCA

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      ■ Describe annual percentage rate (APR).

      ■ Solve problems converting different rates and compounding periods into APR.

      ■ Describe effective annual rate (EAR).

      ■ Solve problems by calculating the EAR.

      ■ Solve for the unknown interest rate (i).

      ■ Solve for the time-weighted return and money-weighted return.

      ■ Explain the Rule of 72 and the Rule of 69 and apply either to solve problems.

      ■ Adjust the number of digits displayed.

      ■ Adjust the frequency of payments as appropriate.

      ■ Clear the function registers after each problem.

      ■ Identify the time value of money keys including: n, i, PV, PMT, and FV.

      ■ Solve for: n, i, PV, PMT, and FV.

      ■ Identify the cash flow keys including: CF, I, NPV, and IRR.

      ■ Solve for: CF, I, NPV, and IRR.

      ■ Check the timing of the cash flows using the beginning and end functions.

      ■ Describe the concept, notation, and application of various formulas.

      ■ Solve problems by calculating (using) various formulas.

      ■ Explain the purpose and structure of the U.S. Federal Reserve System (the “Fed”).

      ■ Describe the mandated goals of the Fed.

      ■ List and describe key economic influences on Fed policy including: nonfarm payrolls, industrial production, housing starts, motor vehicle sales, commodity prices, the employment cost index, and nonfarm productivity growth.

      ■ Define monetary policy and differentiate from fiscal policy.

      ■ Describe and explain how monetary policy is implemented.

      ■ Discuss the impact of monetary policy and its influence on the economy and financial markets.

      ■ Discuss the issue of global credibility and confidence in central banks worldwide.

      ■ Describe the business cycle and discuss the history of U.S. business cycle durations.

      ■ Discuss the history and relationship between gross domestic product (GDP) and recessions in the U.S.

      ■ Define and describe gross domestic product (GDP).

      ■ Compare and contrast GDP to gross national product (GNP).

      ■ Discuss the composition of U.S. GDP.

      ■ Describe implicit price deflators and solve for annualized inflation.

      ■ Describe the impact of inflation on GDP and discuss real and nominal GDP throughout history.

      ■ Discuss the history and explain the importance of consumption expenditures on the economy.

      ■ Discuss the history and explain the importance of investment spending on the economy.

      ■ Discuss the history and explain the importance of government spending on the economy.

      ■ Discuss the history and explain the importance of net exports on the economy.

      ■ Discuss the history and explain the importance of final sales on the economy.

      ■ Discuss the history and explain the importance of corporate profits on the economy.

      ■ Describe the output gap and how it impacts an economy's growth and productivity.

      ■ Discuss the historical timing of indexes relative to cyclical turning points.

      ■ List and describe the four components of the Conference Board's coincident index including: number of employees on nonagricultural payrolls; personal income less transfer payments; industrial production index; and manufacturing and trade sales.

      ■ List and describe the 10 components of the leading index including: average workweek, production workers, and manufacturing; average weekly initial claims for unemployment insurance; manufacturers' new orders for consumer goods and materials; ISM new orders index; manufacturers' new orders for nondefense capital goods, excluding aircraft; monthly building permits for new private housing; stock prices; leading Credit Index, M2 money supply prior to 1990; the interest rate spread between the 10-year Treasury bond and the federal funds rate; and the average consumer expectations for economic conditions.

      ■ List and describe the seven components of the lagging index including: average duration of unemployment; ratio of manufacturing and trade inventories to sales; manufacturing labor cost per unit of output; average prime rate; commercial and industrial loans outstanding; ratio of consumer installment credit to personal income; and change in the consumer price index for services.

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