Lecture 6:
Asset Allocation with
one Risky Asset
Utilization Maximization Theory
Risk and Return
Optimal Investment with one Risky and one Riskless Asset
Readings:
Chapter 5
MGMT411
1
Lecture Outline
 How do we choose
Utility Maximization Theory: Axioms
Lecture 31
Bond Duration
Read: Chapters: 11.1
MGMT411
What is Bond Duration?
In bonds, payments are fixed, so bond prices changes in response to
yield to maturity (YTM).
Think of YTM as the market interest rate.
Bond investors also want to know the inter
Lecture 31
Bond Duration
Read: Chapters: 11.1
MGMT411
What is Bond Duration?
In bonds, payments are fixed, so bond prices changes in response to
yield to maturity (YTM).
Think of YTM as the market interest rate.
Bond investors also want to know the inter
Lecture 1:
Introduction
Introduction of this course
Readings:
Sections 1.1, 1.2, 1.3, 1.4, 1.5, 1.6
MGMT411
Overview

What is Investment?

Importance of financial markets

Overview of financial markets

The investment process
MGMT411
What is investmen
Buying on marginExample 1
Dee Traders open an brokerage account to buy 300 shares of
Internet Dream at $40 per share. She borrows $4000 from her
broker to help pay for the purchase. The interest rate on the loan
is 8%.
a.
b.
c.
What is the margin in Dees
1. Buying on MarginExample 1 solution:
a. The stock is purchased for: 300 x $40 = $12,000
The amount borrowed is $4,000. Therefore, the investor put up equity, or
margin, of $8,000.
b. If the share price falls to $30, then the value of the stock falls to
Lecture 9:
CAPM
Capital Asset Pricing Model
Readings:
Sections 7.1, 7.2
1
Review
Conclusion from Historical Observations
Positive relation between volatility and average returns for large
portfolio,
but no precise relation between volatility and average r
Lecture 10:
Other Asset Pricing
Models
Other Asset Pricing Models
Readings:
7.4
1
Outline:
Intertemporal CAPM, Consumption CAPM

Three Factor Model

2
Intertemporal CAPM
So far, we have assumed that investors have a singleperiod
investment horizon. (In