Chapter 15
Mutual Funds: An Easy Way to
Diversify
What is a Mutual Fund?
Investment company that
pools money from
investors to buy stocks,
bonds, and other
investments. Investors
own a share of the fund
proportionate to the
amount of the investment.
Prent
Chapter 18
Fitting the Pieces Together
The Ingredients of Success
Evaluate you financial
health
Plan and budget
Manage your cash and
credit
Make knowledgeable
consumer decisions
Have adequate
insurance
Prentice Hall Inc.
Understand the sound
principles of
Capital Budgeting and Risk Analysis
in the Oil and Gas Industry
by
Betty J. Simkins, Ph.D.
Williams Companies Professor of Business
& Professor of Finance
Oklahoma State University
Email: [email protected]
Outline
Valuation of Oil & Gas assets is
Finance 4333
Markets and Internet Data
Professor Boquist
October 18, 2011
Lecture 16 Markets and Internet Data, Part I
1
The Bond Market
Because interest rates change in very small
increments, interest rate changes are expressed in
basis points, where 10
Finance 4333
Markets and Internet Data
Professor Boquist
October 20, 2011
Lecture 17 Markets and Internet Data, Part II
1
The Stock Market
The three main stock exchanges in the USA are the
NYSE, the NASDAQ and the AMEX
Lets look up JP Morgan Chase (Tick
Finance 4333
The Cost of Capital
Adam Usman & Professor Boquist
October 27, 2011
Lecture 19 The Cost of Capital, Part II
1
The Cost of Preferred Equity
Recall the formula for the value of preferred stock:
=
We can easily rearrange this equation to solve
Finance 4333
Capital Budgeting
Professor Boquist
November 1, 2011
Lecture 20 Capital Budgeting, Part I
1
What is Capital Budgeting?
Capital (money) is a scarce resource, and hence a
firm must make decisions on how to allocate it
This process is called C
Finance 4333
Capital Budgeting
Professor Boquist
November 8, 2011
Lecture 22 Capital Budgeting, Part III
1
Mutually Exclusive Projects
To see IRR graphically, use Excel to chart the NPV of project
1 for the following discount rates: 5%, 10%, , 70%
When
Finance 4333
Risk & Capital Budgeting
Professor Boquist
November 15, 2011
Lecture 24 Risk & Capital Budgeting, Part II
1
Historical Returns
There is a well known study of historical returns on stocks,
bonds and T-Bills by Roger Ibbotson and Rex Sinquefie
Finance 4333
Portfolio Statistics and Diversification
Professor Boquist
November 22, 2011
Lecture 25 Portfolio Statistics and Diversification, Part I
1
Portfolio Returns
Generally, investors hold more than one asset (stock, bond,
etc) in their portfolio
Finance 4333
Portfolio Statistics and Diversification
Professor Boquist
November 29, 2011
Lecture 26 Portfolio Statistics and Diversification, Part II
1
Correlation
Graphically, we can see the impact of different correlations
below (in the simplified cas
Finance 4333
Options and Derivatives
Professor Boquist
December 1, 2011
Lecture 27 Options and Derivatives, Part I
1
Option Basics
Options are a type of financial derivative
They derive their value from another asset, hence the term
They are also zero-
Finance 4333
Options and Derivatives
Professor Boquist
December 6, 2011
Lecture 28 Options and Derivatives, Part II
1
Option Profit Example
Lets say you think DVN will be worth $84 a share on Jan. 20,
2012 (the date the options expire)
Data from Dec. 5,
Finance 4333
Options and Derivatives
Professor Boquist
December 8, 2011
Lecture 29 Options and Derivatives, Part III
1
Call Option Bounds
Upper bound
Call price must be less than or equal to the stock
price
Lower bound
Call price must be greater than
Finance 4333
Risk & Capital Budgeting
Professor Boquist
November 10, 2011
Lecture 23 Risk & Capital Budgeting, Part I
1
Review of Statistics
The expected value of a random variable X is given by:
( )=
Where is the ith possible outcome and
will occur
is
Finance 4333
Common Stock Valuation
Professor Boquist
October 6, 2011
Lecture 13 Common Stock Valuation, Part II
1
The Two-Stage Growth Model
Assuming that dividends grow at one rate forever
doesnt make sense given the normal life cycle of a
company: ver
Finance 4333
Capital Budgeting
Professor Boquist
November 3, 2011
Lecture 21 Capital Budgeting, Part II
1
Choosing Projects
In this class, NPV will be the main criteria for
choosing a project
Example: your company is considering opening a
new store in e
Finance 4333
Bond Valuation
Professor Boquist
October 11, 2011
Lecture 14 Bond Valuation, Part I
1
Bond Payments
The simplest type of bond is a zero-coupon bond,
which simply pays the face value (usually $1,000) at a
specified date
Example: draw a timel
Finance 4333
Time Value of Money
Professor Boquist
September 22, 2011
Lecture 10 Time Value of Money Part 3
1
Growing/Graduated Annuities
As a reminder, here is the formula for the
value of a growing annuity:
=
September 22, 2011
1+
1
1+
Lecture 10 Time
Finance 4333
Bond Valuation
Professor Boquist
October 13, 2011
Lecture 15 Bond Valuation, Part II
1
The Yield Curve
We know how to calculate the YTM for a specific bond of
a specific maturity
The Yield Curve shows the yields for bonds of different
matur
Finance 4333
The Cost of Capital
Professor Boquist
October 25, 2011
Lecture 18 The Cost of Capital
1
What is Capital?
Capital is money raised from investors
It is the right-hand side of the balance sheet
Debt
Preferred Stock
Common Stock
Each type o
Bloomberg
Energy
The source for energy market data
1
Who Are We?
The Bloomberg Professional service is an interactive financial
information network that seamlessly integrates NEWS, DATA and
ANALYTICS all into one common platform.
Began in 1981 by Michael