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Review Oct 19 2011

Review Oct 19 2011 - FINA3104 MidtermReview DarwinChoi...

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FINA 3104: Investment Analysis and Portfolio Management Midterm Review Darwin Choi October 19, 2011 Midterm Announcements Midterm: Monday, October 24, 7:30 9:30pm – LTA We will post a Seating Plan on LMES later this week Material: Lecture 1 (Course overview) to Lecture 11 (APT and Multifactor Models), inclusive Required Readings in the Syllabus No questions on REUTERS and Optional Readings Style (Similar to past midterms on LMES): Total 120 points Both conceptual questions and calculations True/False 45 points, Short Questions 74 points
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Midterm Announcements Exam is closed book, closed notes Allowed to use: Pen or pencil, calculator Not allowed to use: Phones, computers, etc. Formulas (“Formula Sheet Fall 2011” on LMES) will be provided Office Hours: Wednesday Oct 19 2:30 5pm Thursday Oct 20 9am 12pm, 2:30 5pm Friday Oct 21 3:30 5pm Monday Oct 24 9am 12pm Environment Instruments Trading Returns Risk Allocation Selection CAPM & Index Models APT The Investment Process
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Lecture 1: Environment What is an investment? Current commitment of money (or other resources) Expect to reap future benefits Current vs. future: Sacrifice now and get something back later Expectation: The future benefits are uncertain 5 Lecture 1: Environment Real Assets Assets used to produce goods and services Financial Assets Claims on real assets Primary Market New issues of securities Secondary Market Already existing securities are bought and sold 6
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Lecture 1: Environment Why do we need financial markets? 1. Allocation of capital 2. Consumption timing 3. Allocation of risk 4. Separation of ownership and management 7 Lecture 2: Trading Financial Instruments Marketable vs. Non marketable Primitive securities vs. Derivative securities Securities Indexes Price weighted, value weighted How securities are traded Secondary markets: direct search, brokered search, dealer markets, auction markets Market orders vs. Limit orders Buying on margin & Short selling 8
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