Premium Essay

Investement

In: Business and Management

Submitted By mfgsupply11
Words 30192
Pages 121
Study notes of Bodie, Kane & Marcus

By Zhipeng Yan

Investment
Zvi Bodie, Alex Kane and Alan J. Marcus
Chapter One: The Investment Environment ....................................................................... 2
Chapter Two: Financial Instruments................................................................................... 4
Chapter Three: How Securities Are Traded........................................................................ 8
Chapter Six: Risk and risk aversion.................................................................................. 12
Chapter Seven: Capital Allocation between the Risky asset and the risk-free Asset ....... 17
Chapter Eight: Optimal Risky Portfolios:......................................................................... 20
Chapter Nine: The Capital Asset Pricing Model .............................................................. 24
Chapter Ten: Index Models: ............................................................................................. 28
Chapter Eleven: Arbitrage Pricing Theory and multifactor models of risk and return .... 32
Chapter Twelve: Market Efficiency and Behavioral Finance........................................... 35
Chapter Fourteen: Bond prices and yields ........................................................................ 43
Chapter Fifteen: The Term Structure of Interest Rates..................................................... 48
Chapter Sixteen: Managing Bond Portfolios .................................................................... 53
Chapter Eighteen: Equity Valuation Models .................................................................... 57
Chapter Twenty: Option Markets: Introduction ............................................................... 59
Chapter Twenty-one: Option…...

Similar Documents

Premium Essay

Biotech Business Plan

...harvesting, processing, manufacture, distribution and marketing of added-value products based on biological raw materials from existing or new biologically-based industries, including technologies. POTENTIAL: Lots of surgeries require tissue and organ transplants. Getting a donor is hard enough. The situation worsens when there are rejections. Our venture aims at creating more options for people and making it easier for them to overcome tissue and organ rejections. Consider cases of burn victims who are unable to survive dur to lack of skin tissues available. Due to a large demand the business idea promises to be very lucrative. CHALLENGES: The primary challenge is the large amount of investement required , particularly for the storage facilities which will be needed, the high efficiency equipment and manpower. But this venture seems lucrative enough to attract adequate sponsorship from the right quarters, maybe even goverment funding of research might be an option. NOTE: (The statistics and figures will be incorporated at the later stage.This is merely an abstract) Technologies involved: Stem cell and tissue culture,cryopresevation,cloning of cell types using nuclear transfer method....

Words: 395 - Pages: 2

Premium Essay

Roccoco Hotel

...the Roccoco Hotel, the service really is the issue. That is why, after thorough and deep analysis, we decided to implement a well-structured Human Ressource Plan together with the introduction of a Revenue Management system. It will help us to: - enhance the employees’ performance - improve the overall quality of service of the hotel -justify higher salaries by linking them to performance -reduce the turover rate -improvement of the relationship between employees and managers Revenue Management will help gain the competitive advantage by differentiating our price policy and maximizing our profits which will lead us to the path of success. Eventually it will be costly and time-consuming but the training is one of the best investements a company can make....

Words: 760 - Pages: 4

Premium Essay

Ibm Case

...109 86,100 22,922 13,905 36,827 15,508 14,332 66,667 19,433 86,100 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1999 5,831 37,324 43,155 17,590 26,750 87,495 25,348 14,230 39,578 14,124 13,282 66,984 20,511 87,495 ANCIAL LEVERAGE 1997 $ $ 6,093 $ 78,508 $ 1998 6,328 $ 81,667 $ 1999 7,712 87,548 $ $ 81,499 $ 19,816 $ 7.76% 0.96 7.48% 4.11 30.75% 86,100 $ 19,433 $ 7.75% 0.95 7.35% 4.43 32.56% 87,495 20,511 8.81% 1.00 8.81% 4.27 37.60% ity - Net Interest expense after tax / Equi 1997 $ $ $ $ $ $ $ 491 $ 6,584 $ 12,588 $ 18,347 $ 6,143 $ 30,935 $ 25,959 $ 30.75% 21.28% 39.0% 1998 499 $ 6,827 $ 13,670 $ 19,631 $ 9,740 $ 33,301 $ 29,173 $ 32.56% 20.50% 37.8% 1999 477 8,189 11,976 17,590 8,293 29,566 28,804 37.60% 27.70% 36.5% eir investements and all financial decisions. All Comment Net income increased meaning sales went up and operating costs were handled more efficient.efficiency. Sales also increased between 1996 and 1999. Assets did not increase much (7.8% increase). Shareholder's Equity stayed relatively the same. More than 1 point increase between 1996 and 1999 meaning IBM increased the ability to stay profitable. Assets turnover also increased from 0.94 to 1.00 meaning there is now $1 in sales for each dollar on assets. The company improved their operating strategy and financial management. Financial leverage increase from $3.75 to $4.27. These is the amount of assets for each dollar invested by shareholders. ROE increased omore than 10%. This shows that......

Words: 723 - Pages: 3

Premium Essay

Case Study

... | | | | | II. Investing in hedge funds  (1 mark)  • Key differences with mutual funds in terms of investment strategy, risk, and reward.  The Major Similarity between Mutual Funds and Hedge funds is that both are vehicles that allow private investors to pool assets to be invested by a fund manager .But the difference arise in terms of their investment strategy ,like hedge funds are only opened to wealthy or institutional investors and many require investors to agree to initial lock ups that is a investor has to continue with the investement for a long period .This strategy allows the fund mangers to invest in illiquid investments .The fund managers can also purse investment strategies like use of derivatives ,short sales and leverage which are not used for mutual funds investment strategies .While there are various types of mutual funds specifying their investment policies . In terms of Risk ,Hedge funds are subject to minimial securities and exchange comiision regulations ,so they are more risky than mutual funds . Hedge funds yield higher returns as compared to mutual funds . III. Arbitrage opportunity (2 mark)  • ......

Words: 977 - Pages: 4

Free Essay

Investements

...list of Frequently Used Symbols and Notation A text such as Intermediate Financial Theory is, by nature, relatively notation intensive. We have adopted a strategy to minimize the notational burden within each individual chapter at the cost of being, at times, inconsistent in our use of symbols across chapters. We list here a set of symbols regularly used with their specific meaning. At times, however, we have found it more practical to use some of the listed symbols to represent a different concept. In other instances, clarity required making the symbolic representation more precise (e.g., by being more specific as to the time dimension of an interest rate). Roman Alphabet a Amount invested in the risky asset; in Chapter 14, fraction of wealth invested in the risky asset or portfolio AT Transpose of the matrix (or vector)A c Consumption; in Chapter 14 only, consumption is represented by C, while c represents ln C ck Consumption of agent k in state of nature θ θ CE Certainty equivalent CA Price of an American call option CE Price of a European call option d Dividend rate or amount ∆ Number of shares in the replicating portfolio (Chapter xx E The expectations operator ek Endowment of agent k in state of nature θ θ f Futures position (Chapter 16); pf Price of a futures contract (Chapter 16) F, G Cumulative distribution functions associated with densities: f, g Probability density functions K The strike or exercise price of an option K(˜) Kurtosis of the random variable x x ˜ L A......

Words: 166919 - Pages: 668

Premium Essay

International Bsinrsss

...moving away from independent countries to interconnected counties 2. Status ( where we are + measurements) Wave of globalization after WOII * 50 – 60 domination of the US (“free market wave”) The trade rules are set by the US * Now domination China, Asia US domination is gone, different countries dominate the world The demographics of the world economy has changed How do you measure globalization? * University of zurich * http://globalization.kof.ethz.ch/ The KOF Index of Globalization measures the three main dimensions of globalization: 1. Economic globalization * Actual flows (37%) * Trade (percentage of GDP) * Foreign direct investement, flows (percentage of GDP) * Portfolio investement (percentage of GDP) * Income payments of foreign nationals (percentage of GDP) * Restrictions * Hidden import barriers * Mean tariff rate * Taxes on international trade (percentage of current revenue) 2. Social (39%) * Data on personal contact * Data on information flows 3. political. (25%) * Embassieses 3. Types of globalization 1. Globalization of products 2. Globalization of markets Active vs passive globalization Globalization can also be passive. Companies that do not want to globalize could also be affected by globalization. Companies might lose everything if they do not globalize 4. What are the......

Words: 10538 - Pages: 43

Premium Essay

Tootsie vs Hershey

...measurements are enough to show they are operating successfully. Their only draw-back, other than limiting growth opportunities, is their higher solvency ratios. Which may only show that they have chosen to pursue a strategy of financing their operations with more debt than Tootsie. While Tootsie has a strong liquidity position, I have concerns that they are not properly utilizing this position and it seems wasteful to have so much excess current assets without either reinvesting it into the organization to increase revenues or paying dividends out. Additionally, their deteriorating profitability ratios is a concern. This is all with knowledge that Tootsie’s beta ratio is .62 versus Hershey’s of .28. Showing that, while both are a low-risk investement, Tootsie is three-times more riskier than Hershey. Not worth the additionally risk with lower profitability results from a smaller company....

Words: 1067 - Pages: 5

Premium Essay

Diamond Chemicals

...share has fallen to 30 Euros at the end of 2000 from around 60 Euros at the end of 1999. Original Assumptions |   |   | Suggested Assumptions |   | Annual Output | 250000 |   | Annual Output | 250000 | Output Gain/Original Output | 7% |   | Output Gain/Original Output | 7% | Price/ton (Pounds Sterling) | 541 |   | Price/ton (Pounds Sterling) | 541 | Inflation rate (Prices and costs) | 0% |   | Inflation rate (Prices and costs) | 0% | Gross margin(Ex Depr.) | 12.50% |   | Gross margin(Ex Depr.) | 12.50% | Old Gross Margin | 11.50% |   | Old Gross Margin | 11.50% | Tax Rate | 30% |   | Tax Rate | 30% | Investement outlay (in mn) | 9 |   | Investement outlay (in mn) | 11 | Discount Rate | 10% |   | Discount Rate | 7% | Depreciable rate (yrs) | 15 |   | Depreciable rate (yrs) | 15 | Overhead/Investement | 3.50% |   | Overhead/Investement | 3.50% | Salvage value | 0 |   | Salvage value | 0 | WIP Inventory/COGS | 3% |   | WIP Inventory/COGS | 3% | Months Downtime , Construction | 1.50% |   | Months Downtime , Construction | 1.50% | After Tax Scrap | 0 |   | After Tax Scrap | 0 | Loss due to Construction | 0.76 |   | Loss due to Construction | 1.52 | Preliminiary Engg Costs | 0.5 |   | Preliminiary Engg Costs | 0.5 | | | | | | Cash Flow | CF (in Mn) |   | Suggested | CF (in Mn) | 0 | -9 |   | 0 | -11 | 1 | 1.4 |   | 1 | 1.14 | 2 | 2.66 |   | 2 | 2.66 | 3 | 3.09 |   | 3 | 3.09 | 4 | 3.06 |   | 4 | 3.06 | 5 | 3.02 |   | 5 | 3...

Words: 636 - Pages: 3

Premium Essay

Summary of Harvard Management Company (2010)

...1990 is $4.7 billion, in 1995 is $7 billion, in 2000 is $18.3 billion, in 2005 is $25.2 billion and in 2009 is $25.4 billion. The endowment spending for university is increased continuosly too. The endowment spending for university in 1990 is $180 million, in 1995 is $283 million, in 2000 is $556 million, in 2005 is $855 million and for 2009 is $1.5 bilion. * Investment for Endowment From 1980s until 2009, the HMC investment for endowment is changed. In the previous 1980s, HMC invest in domestic stocks, bond and cash. The proportion are 60% in stocks, 30% in bond and 10% in cash. In the middle of 1980s, HMC shifted the investment in venture capital, real estate and oil and gas. The proportion for all of this is 25%. The currently investement they made Policy Portfolio for diversify risk and exposed to multiple assets classes. There are some benefits of using Policy Portfolio which are, HMC can protect the long term investment because the assets are mixed with approriate level of risk and it provides control and competitive benchmark. * The Hybrid Theory Investment The unique investment theory which used by HMC is a Hybrid Model. The definition of this model is the HMC investment are taken care with 2 management which are External management and Internal Management. The external management can provide diversification, insight and perspective from many investment opportunity around the world. The internal management can provide better control and cost effectivity. ......

Words: 602 - Pages: 3

Premium Essay

Lean Operations

...company could offer a deal on the items to increase sales and minimise waste. Lean Operations Purchasing new tills should not be a problem for such a large profitable business such as Subway, and is only a relatively small investment in itself. It would simply require an area where more tills are installed at the end of the process so more than one person can purchase at a single given time. However, there is no point in having these extra tills if there are no additional staff to work these tills. For this to be effective these tills must be occupied at all times, to ensure more customers can be served at one given time, reducing the current waiting times. This therefore requires the recruitment of more staff. So what seemed a small investement in tills would actually require an extra investment in the recruitment of staff. Also, there may not be enough space to install more tills with the current layout. Most subway branches consist of a long thin rectangular area with just enough room for one till at the end. Therefore to install more tills into these branches the area behind the counter may have to be increased. Or the branches may even have to be made larger with more tills they could effectively serve more people at the same time hence more people can be queuing at the same time. Location Decision If subway was to implement a student discount it would need to advertise this effectively. One problem may be that students do no even know there is a student......

Words: 982 - Pages: 4

Premium Essay

Shares Investment

...economic growth periods. With such a strategy, the following tools will be utilized. Firstly, taking long positions. Anticipating that the price of the stock or security will increase. Secondly, exercising call options. Which will allow for the right to buy a stock at a particular price until a specific date, upon which the option to exercise this right at if the stock price is anticipated to rise. Therefore, the option to sell can be utilised. Thirdly, in Electronic Traded Funds (ETF’s). Generally with ETF’s, there are lower transaction costs and operating expenses are low. ETF’s also require no investment minimum. Examples of such are the Standard & Poor’s 500 index (S&P 500) and the Dow Jones Industrial Average (DJIA). GROWTH INVESTEMENT STRATEGY: Growth stocks are shares of a company that are expected to increase at a rate above average relative to that of the market. As growth investors, looking for companies with earnings that are rapidly increasing is what will be looked into. The companies being invested into are companies that are within emerging economies, with unique as well as innovative products that will excellently perform. Such companies are very attractive, due to great promising future prospects, such as price appreciation. Thus we pay less for the share now, watch it grow and sell it for a much higher price later. It is of the utmost importance that active management be utilised, to stay abreast in the market. Having a diversified portfolio will......

Words: 1046 - Pages: 5

Premium Essay

Mobadala

... and able to function and serve the policy within the Company. As what is mentioned above, the marketing section is sensitive jobs that need well-experienced people who are capable of handling all problems of marketing, Mubadala is successful as I can identify that when I consider the results which embodied getting ISO 2001 certificate. References Books: 1. Gafar, M. S. (1985-1995). A Recent investements history of the United Arab Emirates . In R. L. Hill, the Emirates Investements (pp. 31,32,33).: U.A.E. University, Publications Dept. 2. O'Neill, P. M. (2002.). Medicine. Edinburgh: Churchill Livingstone. 3. Organization., W. H. (1998-1999). Guidelines for essential trauma Investements care. In U. U. Science, investements abstracts. (p. 137 ). Abu Dhabi: Abu Dhabi University. 4. Scotland, N. Emirates investements comp.score. 5. Selin, H. (c2003., Dec 7th ). Medicine across cultures . Dordrecht, Boston, Boston. 6. UAE, M. A. (2007, July 4). Investements strategies . UAE, Dubai, Dubai. 7. Westwood, J. D. (2006., April 6th ). Medicine Reality Of UAE . Amsterdam, Amsterdam, Amsterdam. Web site 1. Ted, J. &. (1987, Feb 5th). Emirates medicine Comp ltd . Retrieved March 11, 2010, from Medidine cooperation: http://www.EMC.ltd.ae 2. www.Mubadala.org.uae.com ----------------------- Operation Management of Mubadala Development Company Done...

Words: 2371 - Pages: 10

Free Essay

Investment Pattern of Retired Individuals

...INVESTEMENT PATTERN OF RETIRED PERSON For most people, the regular income comes in the form of a salary, which is paid monthly. Because of the regularity of income during our working life, we usually adapt our spending To fit in with our income patterns. By the time retirement comes around we usually have our Income and spending patterns well practiced, although these may change a little in retirement. During retirement, or at some stage before, we also need to plan what we are going to do with Our retirement savings. Usually this will involve looking at what to do with our superannuation Money and any other savings that we may have accumulated along the way. In view of the Above facts, it falls on the concerned person to do financial planning in a way he/she not only Maintains the lifestyle but also has financial independence as well. RETIREMENT PLANS There are many factors related to retirement planning, and it is never too early to begin. You may Define your retirement goals and need to start a retirement savings plan before considering Actual retirement. Follow the following four simple steps to arrive at an ideal retirement plan. Step 1: Decide how much income you require to live comfortably in your post-retirement Years. Remember to take into account aspects like increased medical costs, expenses and gifts For family. Step 2: Calculate the amount to be received in lump sum (terminal benefits) at the time of Retirement. Step 3: Select the right......

Words: 1196 - Pages: 5

Premium Essay

Federal Income Tax - Business

...Tax deductions are related to the legislative grace and the ability-to-pay concept. 2 Restrictions: 1. Only deductions allowed by the tax law may be subtracted to compute taxable income. Congress allows deductions for the costs of earning income and certain expenditures. 2. A deduction is allowed for an item only if all requirements are satisfied. Business Expense: the expense must have a business purpose that is unrelated to its tax effect. Gross Income: Only the excess of an individual’s capital investement. The deduction for an item may not exceed the cost. Basis: The cost of an asset or an expense. Represents the max amt of an expenditure that can be deducted as a recovery of capital. Trade or business expenses are deducted FOR adjusted gross income (always) Production-of-income expenses are deducted FROM adjusted gross income-Does not apply to Corportations (deduction is reduced by 2% agi. If agi is 40,000 (6%=$800) and exp is $6000, amt of deduction is $5200) Conduit Entity: Investment expenses of individuals & miscellaneous itemized deductions must be reduced by 2% of agi. Most common deductions that must be reported separately -Charitable contributions - Investment interest expense -Investment expense -Section 179 expense -Nondeductible expenses TRADE OR BUSINESS EXPENSES • Sec 162, “ all the ordinary and necessary expenses…including salaries & compensation, traveling expenses (including meals & lodging), and rentals or other payments......

Words: 1410 - Pages: 6

Free Essay

Formula

...24-Cost of equity capital=(current annual dividend per common share/current market price per common share)+expected dividend growth rate;Payback period=initial investment/annual operating cash flows; Accting rate of return on initial invest= average annual increase in NI/initial investment;Accting rate of return on average investment=average annual increase in NI/Average investment; 23-ROI=invested center income/investment asset base;ROI=investement turnover{[sales/investment center asset base]} x return on sales{[investment center income/sales]}; 22-Actual cost=Actual quantity(AQ)*Actual price(AP);Stnd cost of actual input=actual quantity(AQ)*stnd price(SP);Flexible budget cost=stnd quantity allowed(SQ)*stnd price(SP);Material price variance=AQ(AP-SP);Material quantity variance=SP(AQ-SQ);total flexible budget material variance=Material price variance + Material quantity variance; Actual Cost=Actual hrs(AH)*Actual Rate(AR);Stnd cost of inputs=Actual hrs(AR)*Stnd rate(SR);Flexible budget cost=Stnd hrs allowed(SH)*Stnd rate(SR);labour rate variance=AH(AR-SR);labor efficiency variance=SR(AH-SH);total flexible budget labor variance= labour rate variance + labor efficiency variance; Revenue variance=(actual volume*Actual price)-(budgeted volume*budgeted price);sale price variance=(actual selling price-budgeted selling price)*actual sales volume;sale volume variance=(actual sales volume-budgeted sales volume)*budgeted selling price; net sales volume variance=(actual......

Words: 493 - Pages: 2