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Financial Notes jan 24

Financial Notes jan 24 - are factored in as well LEVERAGE...

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Financial Notes 1/24/12 Reservation Price – highest price one is willing to pay at auction Dutch Auction – Clock starts at a high price, and it slowly decreases over time. The first person to press a button and buy gets the item. A Dutch Auction or reverse auction ends up selling at the highest reservation price IPO price and market price are not necessarily similar In the IPO the previous owners have superior knowledge of projected earnings of the company – usually sell when the company is at the height of its perceived value Mutual funds increases liquidity Net Asset Value (NAV) for a mutual fund – multiply each stock price * amount owned, total them up, then divide by the number of mutual fund shares issued – called net because liabilities
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Unformatted text preview: are factored in as well LEVERAGE The book value is the NAV per share – the stock will be trading at a premium (market > book) if investors are optimistic about future earnings Book value = par value Additional Paid in capital – when price at IPO is greater than par value A mutual fund that recalculates at the end of the day its NVA and lets investors buy or sell shares is called an open ended fund Open ended funds are their own market makers Closed end funds can trade at a discount or premium – examples are real estate investment trusts ETF – Exchange Traded Funds – are the same as open ended funds but they do it on a per-second basis as opposed to the end of the day...
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