Fundamentals of Investing [RENTAL EDITION]

Front Cover
Title Page
Copyright Page
Brief Contents
Contents
About the Authors
Preface
Acknowledgments
Part One Preparing to Invest
	Chapter 1 The Investment Environment
		Opening Vignette
		Investments and the Investment Process
			Attributes of Investments
			The Structure of the Investment Process
		Types of Investments
			Short-Term Investments
			Common Stock
			Fixed-Income Securities
			Mutual Funds
			Exchange-Traded Funds
			Hedge Funds
			Derivative Securities
			Other Popular Investments
		Making Your Investment Plan
			Writing an Investment Policy Statement
			Considering Personal Taxes
			Investing over the Life Cycle
			Investing over the Business Cycle
		Famous Failures in Finance Ethical Failure—Massaging the Numbers
		Meeting Liquidity Needs with Short-Term Investments
			The Role of Short-Term Investments
		Famous Failures in Finance A Run for the Money
			Common Short-Term Investments
			Investment Suitability
		Careers in Finance
			Developing Skills for Your Career
		Summary
		Discussion Questions
		Problems
		Case Problem 1.1
		Case Problem 1.2
	Chapter 2 Securities Markets and Transactions
		Opening Vignette
		Securities Markets
			Types of Securities Markets
			Broker Markets and Dealer Markets
			Electronic and High-Frequency Trading
			General Market Conditions: Bull or Bear
		Globalization of Securities Markets
			Growing Importance of International Markets
			International Investment Performance
			Ways to Invest in Foreign Securities
			Risks of Investing Internationally
		Trading Hours and Regulation of Securities Markets
			Trading Hours of Securities Markets
			Regulation of Securities Markets
		Basic Types of Securities Transactions
			Long Purchase
			Margin Trading
			Short Selling
		Famous Failures in Finance Short Sellers Tip 60 Minutes
		Summary
		Discussion Questions
		Problems
		Case Problem 2.1
		Case Problem 2.2
	Chapter 3 Information and Securities Transactions
		Opening Vignette
		Investment Research and Planning
			Getting Started in Investment Research
			A Word of Caution About Internet Trading
		Types and Sources of Investment Information
			Types of Information
			Sources of Information
		Understanding Market Averages and Indexes
			Stock Market Averages and Indexes
			Bond Market Indicators
		Making Securities Transactions
			The Role of Stockbrokers
		Famous Failures in Finance Robbing Shareholders to Pay Paul
			Basic Types of Orders
			Online Transactions
			Transaction Costs
			Investor Protection: SIPC and Arbitration
		Investment Advisors and Investment Clubs
			Using an Investment Advisor
			Investment Clubs
		Summary
		Discussion Questions
		Problems
		Case Problem 3.1
		Case Problem 3.2
Part Two Important Conceptual Tools
	Chapter 4 Return and Risk
		Opening Vignette
		The Concept of Return
			Components of Return
			Why Return Is Important
			Level of Return
		Famous Failures in Finance Fears of Deflation Worry Investors
			Historical Returns
			The Time Value of Money and Returns
		Measuring Return
			Real, Risk-Free, and Required Returns
			Holding Period Return
			The Internal Rate of Return
			Finding Growth Rates
		Risk: The Other Side of the Coin
			Sources of Risk
			Risk of a Single Asset
			Assessing Risk
			Steps in the Decision Process: Combining Return and Risk
		Summary
		Discussion Questions
		Problems
		Case Problem 4.1
		Case Problem 4.2
		Chapter-Opening Problem
	Appendix 4A The Time Value of Money
		Opening Vignette
		Interest: The Basic Return to Savers
			Simple Interest
			Compound Interest
		Computational Aids for Use in Time Value Calculations
			Financial Calculators
			Computers and Spreadsheets
		Future Value: An Extension of Compounding
		Future Value of an Annuity
		Present Value: An Extension of Future Value
		Present Value of a Stream of Returns
			Present Value of a Mixed Stream
			Present Value of an Annuity
		Summary
		Problems
	Chapter 5 Modern Portfolio Concepts
		Opening Vignette
		Principles of Portfolio Planning
			Portfolio Objectives
			Portfolio Return and Standard Deviation
			Correlation and Diversification
			International Diversification
		The Capital Asset Pricing Model
			Components of Risk
			Beta: A Measure of Undiversifiable Risk
		Famous Failures in Finance Bulging Betas
			The CAPM: The Connection Between Beta and Expected Return
		Traditional Versus Modern Portfolio Management
			The Traditional Approach
			Modern Portfolio Theory
			Reconciling the Traditional Approach and MPT
		Summary
		Discussion Questions
		Problems
		Case Problem 5.1
		Case Problem 5.2
		Chapter-Opening Problem
		CFA Exam Questions
Part Three Investing in Common Stocks
	Chapter 6 Common Stocks
		Opening Vignette
		What Stocks Have to Offer
			The Appeal of Common Stocks
			Putting Stock Price Behavior in Perspective
		Famous Failures in Finance Beware of the Lumbering Bear
			A Real Estate Bubble Goes Bust and So Does the Market
			The Pros and Cons of Stock Ownership
		Basic Characteristics of Common Stock
			Common Stock as a Corporate Security
			Buying and Selling Stocks
			Common Stock Values
		Common Stock Dividends
			The Dividend Decision
			Types of Dividends
			Dividend Reinvestment Plans
		Types and Uses of Common Stock
			Types of Stocks
			Investing in Foreign Stocks
			Alternative Investment Strategies
		Summary
		Discussion Questions
		Problems
		Case Problem 6.1
		Case Problem 6.2
	Chapter 7 Analyzing Common Stocks
		Opening Vignette
		Security Analysis
			Principles of Security Analysis
			Who Needs Security Analysis in an Efficient Market?
		Famous Failures in Finance Staying on Top a Challenge for Fund Managers
		Economic Analysis
			Economic Analysis and the Business Cycle
			Key Economic Factors
			Developing an Economic Outlook
		Industry Analysis
			Key Issues
			Developing an Industry Outlook
		Fundamental Analysis
			The Concept
			Financial Statements
			Financial Ratios
		Famous Failures in Finance Cooking the Books: What Were They Thinking?
			Interpreting the Numbers
		Summary
		Discussion Questions
		Problems
		Case Problem 7.1
		Case Problem 7.2
		Chapter-Opening Problem
	Chapter 8 Stock Valuation
		Opening Vignette
		Valuation: Obtaining a Standard of Performance
			Valuing a Company Based on Its Future Performance
		Famous Failures in Finance P/E Ratios Can Be Misleading
			Developing a Forecast of Universal’s Financial Performance
			The Valuation Process
		Stock Valuation Models
			The Dividend Valuation Model
		Famous Failures in Finance Ethical Conflicts Faced by Stock Analysts: Don’t Always Believe the Hype
			Other Approaches to Stock Valuation
			Other Price-Relative Procedures
		Summary
		Discussion Questions
		Problems
		Case Problem 8.1
		Case Problem 8.2
		Chapter-opening Problem
	Chapter 9 Market Efficiency and Behavioral Finance
		Opening Vignette
		Efficient Markets
			The Efficient Markets Hypothesis
			Market Anomalies
			Possible Explanations
		Behavioral Finance: a Challenge to the Efficient Markets Hypothesis
			Investor Behavior and Security Prices
		Famous Failures in Finance Loss Aversion and Trading Volume
		Famous Failures in Finance Buying High and Selling Low
			Implications of Behavioral Finance for Security Analysis
		Technical Analysis
			Measuring the Market
			Trading Rules and Measures
			Charting
		Summary
		Discussion Questions
		Problems
		Case Problem 9.1
		Case Problem 9.2
		CFA Exam Questions
Part Four Investing in Fixed-Income Securities
	Chapter 10 Fixed-Income Securities
		Opening Vignette
		Why Invest in Bonds?
			A Brief History of Bond Prices, Returns, and Interest Rates
			Exposure to Risk
		Essential Features of a Bond
			Bond Interest and Principal
			Maturity Date
			Principles of Bond Price Behavior
			Quoting Bond Prices
			The Call Feature
			Sinking Funds
			Secured or Unsecured Debt
			Bond Ratings
		Famous Failures in Finance Rating Agencies Miss a Big One
		The Market for Debt Securities
			Major Market Segments
		Famous Failures in Finance Yield Spreads Approach Records
		Famous Failures in Finance Implicit Guarantee Might Not Be Forever
			Specialty Issues
			A Global View of the Bond Market
		Convertible Securities
			Convertibles as Investment Outlets
			Sources of Value
			Measuring the Value of a Convertible
		Summary
		Discussion Questions
		Problems
		Case Problem 10.1
		Case Problem 10.2
		Chapter-Opening Problem
	Chapter 11 Bond Valuation
		Opening Vignette
		The Behavior of Market Interest Rates
			Keeping Tabs on Market Interest Rates
			What Causes Rates to Move?
		Famous Failures in Finance Signs of a Recession
			The Term Structure of Interest Rates and Yield Curves
		The Pricing of Bonds
			The Basic Bond Valuation Model
			Annual Compounding
			Semiannual Compounding
			Accrued Interest
		Measures of Yield and Return
			Current Yield
			Yield to Maturity
			Yield to Call
			Expected Return
			Valuing a Bond
		Duration and Immunization
			The Concept of Duration
			Measuring Duration
			Bond Duration and Price Volatility
			Effective Duration
			Uses of Bond Duration Measures
		Bond Investment Strategies
			Passive Strategies
			Trading on Interest Rate Forecasts
			Bond Swaps
		Summary
		Discussion Questions
		Problems
		Case Problem 11.1
		Case Problem 11.2
		CFA Exam Questions
Part Five Portfolio Management
	Chapter 12 Mutual Funds and Exchange-Traded Funds
		Opening Vignette
		The Mutual Fund Concept
			An Overview of Mutual Funds
		Famous Failures in Finance When Mutual Funds Behaved Badly
			Exchange-Traded Funds
			Some Important Considerations
			Other Types of Investment Companies
		Types of Funds and Services
			Types of Mutual Funds
		Famous Failures in Finance Breaking the Buck
			Investor Services
		Investing in Mutual Funds
			Investor Uses of Mutual Funds
			The Selection Process
			Investing in Closed-End Funds
			Measuring Performance
		Summary
		Discussion Questions
		Problems
		Case Problem 12.1
		Case Problem 12.2
		Chapter-Opening Problem
	Chapter 13 Managing Your Own Portfolio
		Opening Vignette
		Constructing a Portfolio Using an Asset Allocation Scheme
			Investor Characteristics and Objectives
			Portfolio Objectives and Policies
			Developing an Asset Allocation Scheme
		Evaluating the Performance of Individual Investments
			Obtaining Data
			Indexes of Investment Performance
			Measuring the Performance of Investments
			Comparing Performance to Investment Goals
		Assessing Portfolio Performance
			Measuring Portfolio Return
			Comparison of Return with Overall Market Measures
			Portfolio Revision
		Timing Transactions
			Formula Plans
			Using Limit and Stop-Loss Orders
			Warehousing Liquidity
			Timing Investment Sales
		Summary
		Discussion Questions
		Problems
		Case Problem 13.1
		Case Problem 13.2
		CFA Exam Questions
Part Six Derivative Securities
	Chapter 14 Options: Puts and Calls
		Opening Vignette
		Call and Put Options
			Basic Features of Calls and Puts
			Options Markets
			Stock Options
		Options Pricing and Trading
			The Profit Potential from Puts and Calls
			Intrinsic Value
		Famous Failures in Finance Ethical Lapse or Extraordinarily Good Timing?
			What Drives Option Prices?
		Famous Failures in Finance The Volatility Index
			Trading Strategies
		Stock-Index and Other Types of Options
			Contract Provisions of Stock-index Options
			Investment Uses
			Other Types of Options
		Summary
		Discussion Questions
		Problems
		Case Problem 14.1
		Case Problem 14.2
		Chapter-Opening Problem
	Chapter 15 Futures Markets and Securities
		Opening Vignette
		The Futures Market
			Market Structure
			Trading in the Futures Market
		Commodities
			Basic Characteristics
			Trading Commodities
		Famous Failures in Finance Shady Trading at Enron
		Famous Failures in Finance Diving Oil Prices Send Cal Dive into Bankruptcy
		Financial Futures
			The Financial Futures Market
			Trading Techniques
			Financial Futures and the Individual Investor
			Options on Futures
		Summary
		Discussion Questions
		Problems
		Case Problem 15.1
		Case Problem 15.2
		CFA Exam Questions
Glossary
Index
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