Chapter 3: Securities Markets
1* Primary (IPO market)
Key factor: issuer receives the proceeds from the sale
Investment Banking Arrangements
1* Underwritten vs. Best Efforts
1* Underwritten: firm commitment on proceeds to the issuing f
IIll. Sharpe nuio for the Meridian Fund?
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Background and Issues
Real Assets (left side of financial balance sheet)
Financial Assets (right side of financial balance sheet)
Claims on real assets vs. derivatives
Contribution of financial assets - how do they provide to the productive
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 and 10% in year 2. What is your two-year return?
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 value of a company? We use the balance sheet to get an ide
The Capital Asset Pricing Model
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 ignorant investors.
General Thought: B & C exist because
Asset Classes and Instruments
Money market instruments are short-term debt obligations of large
corporations and governments.
These securities promise to make one future payment.
When they are issue
DDE I du Pont de Nemours and Co
JNJJohnson & Johnson