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Slides_Fundamentals of Investments - Chapter 1

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A Brief History of Risk and Return A Brief History of Risk and Return. McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu @2002 by the McGraw- Hill Companies Inc.All rights reserved.. 2002 by The McGraw-Hill Companies, Inc. All rights reserved.. McGraw Hill / Irwin. A Brief History of Risk and Return. what financial market history can tell us about...

Slides_Fundamentals of Investments - Chapter 2

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Another important change is the rapid growth of online brokers, also known as e-brokers or cyberbrokers.. http://www.schwab.com. http://www.fidelity.com. http://www.csfbdirect.com. http://www.etrade.com. http://www.tdwaterhouse.com. http://www.ameritrade.com. Which online broker is the best?. http://www.gomez.com. http://www.nasd.com. The portion that is borrowed incurs an interest that is based on the broker’s call money rate, which is the rate brokers pay to borrow bank funds for lending to...

Slides_Fundamentals of Investments - Chapter 3

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Security Types Security Types. McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu. Security Types. d the potential gains and losses from owning it, and. e how its prices are quoted in the financial press.. Interest-bearing Money market instruments Fixed-income securities. Equities Common stock. Preferred stock. Interest-Bearing Assets. Fixed-income securities. Longer-term debt obligations, often of. Money market instruments. Short-term debt...

Slides_Fundamentals of Investments - Chapter 4

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Mutual Funds Mutual Funds. Mutual Funds. Investors added $363 billion in net new funds to mutual funds in 1999, and by the end of the year, mutual fund assets totaled $6.85 trillion.. Mutual funds are simply a means of combining or pooling the funds of a large group of. Like commercial banks and life insurance companies, mutual funds are a...

Slides_Fundamentals of Investments - Chapter 5

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The Stock Market The Stock Market. The Stock Market. “big picture” overview of who owns stocks, how a stock exchange works, and how to read and understand the stock market information reported in the financial press.. Investment banker designs the stock issue and arranges for fixed commitment or best effort underwriting.. It has occupied its current building on Wall Street...

Slides_Fundamentals of Investments - Chapter 6

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economic value of common stocks.. c dividend discount models. statements and other financial and economic information to assess the economic value of a company’s stock.. the present value of the future dividend stream. Method of estimating the value of a share of stock as the present value of all expected. Assuming that the dividends will grow at a constant growth...

Slides_Fundamentals of Investments - Chapter 7

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Earnings and Cash Flow Analysis Earnings and Cash Flow Analysis. Cash Flow is a Company’s Lifeblood.. Earnings and Cash Flow Analysis. statements and perform earnings and cash flow analysis using these. Cash flow statement. The Cash Flow Statement. Cash flow - Income realized in cash form, whether from operations, investments, or financing activities.. Cash flow = Operating cash flow per...

Slides_Fundamentals of Investments - Chapter 8

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Stock Price Behavior and Market Efficiency Stock Price Behavior and. Market Efficiency. One of the funny things about the stock market is that every time one man buys, another sells,. Stock Price Behavior and Market Efficiency. We will also consider if anyone can consistently “beat the market.”. direction based on the monitoring of the Dow Jones Industrial and Transportation Averages.....

Slides_Fundamentals of Investments - Chapter 9

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Interest Rates Interest Rates. Interest Rates. Our goal in this chapter is to discuss the many different interest rates that are commonly reported in the. Interest Rate History. For a look at interest rates from 3000 B.C., visit the historical research. http://www.pei-intl.com. Money Market Rates. Prime rate - The basic interest rate on short- term loans that the largest commercial...

Slides_Fundamentals of Investments - Chapter 10 extra

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Bond Prices and Yields—Extra Bond Prices and Yields—Extra. Bond Prices. Straight bond prices:. M = maturity (years) YTM = Yield to maturity. Assume a bond has 15 years to maturity, a 9% coupon, and the YTM is 8%. What is the price?. More on Bond Prices. Now assume a bond has 25 years to maturity, a 9% coupon, and the...

Slides_Fundamentals of Investments - Chapter 10

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Bond Prices and Yields Bond Prices and Yields. Bond Prices and Yields. understand the relationship between bond prices and yields, and to. examine some of the fundamental tools of bond risk analysis used by fixed-income portfolio managers.. the bondholder a fixed sum of money (called the principal, par value, or face value) at the bond’s maturity, along with constant,. periodic...

Slides_Fundamentals of Investments - Chapter 11

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http://www.investinginbonds.com. http://www.bondresources.com. prospectus of the bond issue.. Securities and Exchange Commission (SEC) must have a trustee appointed to represent the interests of the bondholders.. Î http://www.sec.gov. http://www.convertbond.com. Î Example: In October 1992, Marriott Corporation announced its intention to spin off part of the. The spinoff, called Host Marriott, would acquire most of the parent company’s debt and its poorly performing...

Slides_Fundamentals of Investments - Chapter 12

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http://www.ustreas.gov. There are more than 80,000 state and local governments in the U.S., and together they contribute about $2. http://www.investinginbonds.com. FV = face value. http://www.savingsbonds.com. http://www.salliemae.com. Municipal Bonds. municipal bonds attractive to investors in the highest income tax brackets.. Municipal bonds. Types of Municipal Bonds. Municipal bonds secured by revenues. Hybrid bonds are municipal bonds secured by project revenues with...

Slides_Fundamentals of Investments - Chapter 13

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Mortgage-Backed Securities Mortgage-Backed Securities. Mortgage-Backed Securities. mortgage pools.. A Brief History of Mortgage-Backed Securities. Then, when market interest rates climbed to near 20% in the early 1980s, bank customers flocked to withdraw funds from their savings deposits to invest in money market funds.. Financed by mortgage-backed bonds (also called mortgage pass-throughs), each. payments and then passes the cash flows through...

Slides_Fundamentals of Investments - Chapter 14

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A stock option is a derivative security, because the value of the option is “derived” from the. Î A single standard option is an option to buy/sell. e The option contract size.. f The option expiration date, or option maturity.. g The option exercise style (American or European).. http://www.cboe.com. http://www.amex.com. http://www.phlx.com. http://www.nyse.com. http://www.pacificex.com. Option Price Quotes. strike price and maturity...

Slides_Fundamentals of Investments - Chapter 15

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Black-Scholes-Merton option pricing model.. The difference between a call option price and a put option price for European-style options with the same strike price and. between the underlying stock price and the discounted strike price.. C = call option price P = put option price S = current stock price K = option strike price r = risk-free interest rate....

Slides_Fundamentals of Investments - Chapter 16

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Futures Contracts Futures Contracts. Futures Contracts. Our goal in this chapter is to discuss the basics of futures contracts and how their prices are quoted in the financial press. We will also look at how futures contracts are used and the relationship between current cash prices and futures prices.. Futures Contracts Basics. Futures contract. The specified price is called the...

Slides_Fundamentals of Investments - Chapter 17

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This is calculated as the sum of the possible returns multiplied by their. Variance is calculated as the sum of the. The standard deviation is the square root of the variance. One convenient way of describing a portfolio is to list the percentages of the portfolio’s total value that are invested in each portfolio asset.. The expected return on a...

Slides_Fundamentals of Investments - Chapter 18

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c The normal, or expected, part of the return is the return that investors predict or expect.. d The uncertain, or risky, part of the return comes from unexpected information revealed during the year.. Î Market participants factor predictions into the expected part of the stock return.. Systematic and Unsystematic Risk. Systematic risk. Unsystematic risk. Total risk = Systematic risk...

Slides_Fundamentals of Investments - Chapter 19

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return, thereby “beating” the market?. Performance evaluation. It is computed as a portfolio’s risk premium divided by the standard deviation for the. portfolio’s return.. It is computed as a portfolio’s risk premium divided by the portfolio’s beta coefficient.. interpreted as a measure of how much the portfolio “beat the market.”. If the returns on an investment follow a normal distribution,...