Chapter 1
1. What is a financial investment? What three things do investors demand compensation for when making a
financial investment?
Financial investment is claims on real assets or claims on real-asset income. (/ Common stock- equity/
Derivative secu
Risk and Return
Rates of Return
Holding Period Return
Assume you buy a stock in year t-1 and hold it until year t, and it pays a dividend, dt.
Then the one-period holding return can be figured as follows:
R
t
Pt
P
P
t1
d t
PP
P
t
or
t 1
if dt = 0.
t1
t1
SECURITIES MARKETS
revised 1/30/2010
Investment Banking
Glass - Steagall Act-1933- Between 1930-1933 about 9000 banks failed causing depositors to
lose money. The G-S act:
1)
Created the Federal Deposit Insurance Corporation (FDIC) to provide federal insu
Stock Valuation
The basic model of stock valuation recognizes the importance of income that the owner of the
stock will receive. That is,
Value =
Incomet
1 r
t
t
1
But there are some obvious problems with applying this model to stock prices:
1) Unlike b
InvestmentsStockPricingProblemSet
Name_
ShowAllWork
Use the Following Information for Questions 1 and 2.
A firm currently has earnings of $2 per share and pays out 30% of earnings as
dividends on its common stock. The after tax return on equity is 15%. Th
Test Questions:
1)
j
= 0 This implies no systematic risk, T-bill
j
> 1 This implies that the asset is more volatile than the market, and is more risky.
j
< 1 This implies that the asset is less volatile than the market, and is less risky
Best in Market go
Financial Ratios
Current ratio = CA / CL
Quick ratio = (CA-Inv)/ CL
Interval measure = CA / Average daily operating costs
Total debt ratio = (TA TE) / TA
Long-term debt ratio = LTD / (LTD + TE)
Times interest earned = EBIT / Interest
ie: Sales 250,000.00,
Financial Calculator
Present Value of an Amount
Future Amount
Number of Periods
Interest Rate per Period
Present Value
$10,000
10
9.0%
$4,224
Future Value of an Amount
Present Value
Number of Periods
Interest Rate per Period
Future Value
$10,000
12
10.0%
A
1
ANALYST'S NAME
NAME OF COMPANY
6
FIRST CALENDAR YEAR OF
DATA
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
NUMBER OF YEARS OF DATA
INCOME STATEMENT
Sales Revenue
Less: Cost of Goods Sold
Gross Profits
Less: Operating Expenses:
Selling Ex
Project the PV of each cash flow
DISCOUNT RATE 6.5%
Ritter College
Duration of program in years
tuition per year
books per year
health insurance
room and board per year
2
$60,000.00
$2,500.00
$3,000.00
$20,000.00
job offer salary per year
signing bonus
sa
Bos
NYY
Tor
Bal
Tam
Cle
Det
Min
Kan
Wso
LAA
Sea
Oak
Tex
NYM
Phi
Atl
Was
FLA
CUB
Mil
STL
Cin
Hou
Pit
SD
Ari
LAD
Col
SF
2007 American League Standings
EAST
Boston
NY Yankees
Toronto
Baltimore
Tampa Bay
Cleveland
Detroit
Minnesota
Kansas City
Chicago Sox
LA
Bos
NYY
Tor
Bal
Tam
Cle
Det
Min
Kan
Wso
LAA
Sea
Oak
Tex
NYM
Phi
Atl
Was
FLA
CUB
Mil
STL
Cin
Hou
Pit
SD
Ari
LAD
Col
SF
2007 American League Standings
EAST
Boston
NY Yankees
Toronto
Baltimore
Tampa Bay
Cleveland
Detroit
Minnesota
Kansas City
Chicago Sox
LA
Miro Cuculiza
Mrs. Ana Agapova
04/19/2015
StockTrak Assignment: Investment Analysis
Diversification can mitigate risks associated with ones portfolio. Asset classes perform
differently and have different roles within a portfolio. One sector or class of in
This document applies to the HP 10bII+
Please Note: If you plan to use the calculator in the way I show you now, you must understand what you are doing
and follow some basic rules.
Rule 1: Set your calculator to 6 decimal places. Press
and then press
and
Chapter 1
-Financial Investment: current commintment of money/greater amount of money
-3 things investors do: current consumption,inflation &risk.
-Dif between real and financial asset: real are used to produce good or services and financial deals with
se
Portfolio and Capital Market Theory
Portfolio Theory Selection of optimal portfolios
Efficient Portfolio That portfolio that maximizes expected return at any given level of expected
risk.
Assumptions:
n
1) E R Ri Pi
i
1
i.e., the expected return is the me
1
OPTIONS
Option-
A contract between two traders in which the buyer of the option has the right, but not
obligation, to buy or sell an asset at a fixed price within a specified period of time.
In the definition above:
The two traders are:
a)
The buyer or
Journal Four
Captain Phillips is a movie that was released last year in October, earning lots of money
since then. Also it received six different academy awards nominations. The movie is about a
captain who had a hard task that was going from Oman to Momb
The example of the stakeholder power and interest grid in real life is my scholarship. My
scholarship is a project contain stakeholders. My stakeholders are my advisor, Saudi Arabian
Cultural Mission, the university, and my family. The stakeholder power a
Journal Three
Family weekend is a movie that talks about family consists of two girls and one boy who
used to be together all the time, but now each member of the family is busy in their life. The
oldest girl doesnt like the situation , so she decides to
A) Ravi uses pyramiding strategy, which is a margin trading that Ravi uses paper profit in
his margin account to gain more securities. In this investment situation, Ravi has margin
account with a margin of 60%. He wants to investment in RS, but he doesnt
STOCK MARKET INDICATOR SERIES
There are a number of different ways of computing Stock Market Indexes.
1. Price-Weighted Series Index where prices are summed and then divided by a
divisor that is adjusted for
a. Splits
b. Stock Dividends > 10%
c. New Stock
Rates of Return on Money Market Securities
Securities such as T-bills, Federal Funds, Bankers Acceptances, Repurchase
Agreements (Repos), Commercial Paper, and Negotiable Certificates of
Deposit are Money Market Securities.
T-bills, Fed Funds, Bankers Acc
SECURITIES MARKETS
revised 1/30/2008
Investment Banking
Glass - Steagall Act-1933- Between 1930-1933 about 9000 banks failed causing depositors to
lose money. The G-S act:
1)
Created the Federal Deposit Insurance Corporation (FDIC) to provide federal insu
Portfolio and Capital Market Theory
Portfolio Theory Selection of optimal portfolios
Efficient Portfolio That portfolio that maximizes expected return at any given level of expected
risk.
Assumptions:
n
1) E R Ri Pi
i
1
i.e., the expected return is the me
Risk and Return
Rates of Return
Holding Period Return
Assume you buy a stock in year t-1 and hold it until year t, and it pays a dividend, dt.
Then the one-period holding return can be figured as follows:
R
t
Pt
P
P
t1
d t
PP
P
t
or
t 1
if dt = 0.
t1
t1
BONDS and BOND VALUATION
First Lets Look at the Book to Examine Bond Features
Interest Rates or Yields
Basis Point:
1/100 of 1% of interest
i.e. One percentage point = 100 Basis points
Prices:
1 point in price = $1 on $100 par value, but Par values are ty
BOND RISK AND DURATION (Revised Oct. 2009)
Interest Rate Patterns over the Business Cycle
As the economy heats up, spending increases, unemployment decreases, the demand for loanable funds
increases, and interest rates tend to increase. Conversely, as the