Chapter 03 - Securities Markets
CHAPTER 03
Chapter 03 - Securities Markets
SECURITIES MARKETS
1. An IPO is the first time a formerly privately-owned company sells stock to the general
public. A season
Chapter 01 - Investments: Background and Issues
CHAPTER 01
Chapter 01 - Investments: Background and Issues
INVESTMENTS: BACKGROUND AND ISSUES
1. Equity is a lower-priority claim and represents an owne
Chapter 07 - Capital Asset Pricing and Arbitrage Pricing Theory
CHAPTER 07
Chapter 07 - Capital Asset Pricing and Arbitrage Pricing Theory
CAPITAL ASSET PRICING AND ARBITRAGE PRICING THEORY
1. The req
Portfolio Performance Evaluation
Chapter 18
Abnormal Performance
Big Question: What is abnormal?
Abnormal performance is measured:
* Benchmark portfolio
* Market adjusted
* Market model / index model
Chapter 8-9
Stock Price Behavior and Market Efficiency
Market Efficiency
*
The Efficient market hypothesis (EMH) is a theory that asserts: the prices of
financial assets accurately reflect all relevan
Chapter 2
Asset Classes and Instruments
Classifying Securities
Interest-Bearing Assets
Money market instruments are short-term debt obligations of large
corporations and governments.
These securities
Chapter 02 - Asset Classes and Financial Instruments
CHAPTER 02
ASSET CLASSES AND FINANCIAL INSTRUMENTS
1. Common stock is an ownership share in a publicly held corporation. Common shareholders
have v
Chapter 04 - Mutual Funds and Other Investment Companies
CHAPTER 04
Chapter 04 - Mutual Funds and Other Investment Companies
MUTUAL FUNDS AND OTHER INVESTMENT COMPANIES
1. Mutual funds offer many bene
Chapter 05 - Risk and Return: Past and Prologue
CHAPTER 05
RISK AND RETURN: PAST AND PROLOGUE
1. The 1% VaR will be less than 30%. As percentile or probability of a return declines so does
the magnitu
Chapter 06 - Efficient Diversification
CHAPTER 06
Chapter 06 - Efficient Diversification
EFFICIENT DIVERSIFICATION
1. So long as the correlation coefficient is below 1.0, the portfolio will benefit fr
Chapter 08 - The Efficient Market Hypothesis
CHAPTER 08
Chapter 08 - The Efficient Market Hypothesis
THE EFFICIENT MARKET HYPOTHESIS
1. The correlation coefficient should be zero. If it were not zero,
Chapter 09 - Behavioral Finance and Technical Analysis
CHAPTER 09
Chapter 09 - Behavioral Finance and Technical Analysis
BEHAVIORAL FINANCE AND TECHNICAL ANALYSIS
1.
Note the following matches:
a. Inv
Questions for review, Chapters 6-7
1. To build an indifference curve we can first find the utility of a portfolio with 100% in the risk-free asset, then
A. find the utility of a portfolio with 0% in t
Practice Questions for Final Exam, FIN 623
1. Security A has an expected rate of return of 0.10 and a beta of 1.1. The market expected
rate of return is 0.08 and the risk-free rate is 0.05. The alpha
Practice Questions for Midterm, FIN 623
1.
Consider the following probability distribution for some stock:
State
Good
Bad
E(r)
10
4
prob.
0.40
0.60
If you are risk averse, what would a reasonable cert
The Capital Asset Pricing Model
Chapter 7
E(r)
A
B
C
Up until Markowitz (1950s), view was that best way of handling portfolio
analysis was to find A and buy a lot of it.
B and C bought and held by ig
Equity Valuation
Chapter13
Objective: How to determine the value of a financial asset
Question: How do we determine the value of the company? We first need to ask the question,
what represents the val
CHAPTER 3: HOW SECURITIES ARE TRADED
CHAPTER 3: HOW SECURITIES ARE TRADED
PROBLEM SETS
Answers to this problem will vary.
1.
2.
The dealer sets the bid and asked price. Spreads should be higher on ina
CHAPTER 5: INTRODUCTION TO RISK, RETURN, AND
THE HISTORICAL RECORD
CHAPTER 5: INTRODUCTION TO RISK, RETURN, AND
THE HISTORICAL RECORD
PROBLEM SETS
1.
The Fisher equation predicts that the nominal rate
CHAPTER 6: RISK AVERSION AND
CAPITAL ALLOCATION TO RISKY ASSETS
CHAPTER 6: RISK AVERSION AND
CAPITAL ALLOCATION TO RISKY ASSETS
PROBLEM SETS
1.
(e)
2.
(b) A higher borrowing rate is a consequence of t
CHAPTER 7: OPTIMAL RISKY PORTFOLIOS
CHAPTER 7: OPTIMAL RISKY PORTFOLIOS
PROBLEM SETS
1.
(a) and (e).
2.
(a) and (c). After real estate is added to the portfolio, there are four asset classes in the
po
CHAPTER 15: THE TERM STRUCTURE OF INTEREST RATES
CHAPTER 15: THE TERM STRUCTURE OF INTEREST RATES
PROBLEM SETS.
1.
In general, the forward rate can be viewed as the sum of the markets expectation of
t
Questions for review, Chapters 6-7
1. To build an indifference curve we can first find the utility of a portfolio with 100% in the risk-free asset, then
A. find the utility of a portfolio with 0% in t
Practice Questions for Final Exam, FIN 623
1. Security A has an expected rate of return of 0.10 and a beta of 1.1. The market expected
rate of return is 0.08 and the risk-free rate is 0.05. The alpha
1. e
3. a
4. b
5. a
6. a and d are both correct
7. b
8. e
9. c
10. c
11. d
12. d
13. a
14. c
15. a
16. d
17. c
18. a
19. d
20. c
21. c
22. d
23. c
24. c
25. c
Practice Questions for Midterm, FIN 623
1.
Consider the following probability distribution for some stock:
State
Good
Bad
E(r)
10
4
prob.
0.40
0.60
If you are risk averse, what would a reasonable cert
Background and Issues
Chapter 1
Real Assets (left side of financial balance sheet)
Financial Assets (right side of financial balance sheet)
Claims on real assets vs. derivatives
Contribution of financ
Chapter 5: Risk and Return
Rates of Return
One-period return = HPR =
Cumulative (compounded) rate of return: Assumes that dividends / cash flows
are immediately reinvested
Ex: You earn 5% in year 1 a
Chapter 3: Securities Markets
(1)
Primary Market
1* Primary (IPO market)
Key factor: issuer receives the proceeds from the sale
Investment Banking Arrangements
1* Underwritten vs. Best Efforts
1* Und