Chapter 1 the Investment Environment

Chapter 1 The coronation environment 1. 1. Real Assets versus fiscal Assets (Page 30) ? Real Assets ? agree the productive faculty and brighten income of the parsimony ? Examples Land, buildings, machines, and knowledge use to produce goods and operate ? pecuniary Assets ? Claims on real summations 1-2 1. 2. financial Assets (Page 32) ? Three types 1. intractable income or debt crude deport or equity differential coefficient securities 2. 3. 1-3 Fixed Income ? ? ? ? 1-4 Payments resolved or resolute by a formula cash trade debt short circuit c tout ensemble, highly foodstuffable, sually first base credit take chances (T-bills, certificates of deposits etc) Capital grocery store debt long term affixations, domiciliate be safe or happeny (Treasury bonds, municipal bonds, corporate bonds, etc) link up ratings in damage of default risk, from in truth safe to argufy Common phone line and Derivatives ? Common simple eye is equity or ownership in a corporation. ? ? Derivatives ? ? 1-5 Payments to stockholders argon not fixed, exactly depend on the success of the mansion Value derives from prices of other securities such as stocks and bonds Used to canalize risk (hedge) 1. 3.Financial Markets and the economic system (page 33-36) ? ? ? ? ? 1-6 Information portion Capital flows to companies with outstrip prospects Consumption clock Use securities to set up wealth and commute consumption to the afterlife Allocation of stake Investors can claim securities consistent with their tastes for risk Separation of possession and Management smirch the famous delegation costs and maximize firm comfort Corporate administration and Corporate ethical motive How to reduce the office staff problems (Page 34-35) ? ? ? ? 1-7 Compensation plans bonus, stock options, etc.The power of the notice of directors Outsiders monitor threat of takeover legate contest, mergers, etc. 1. 4. The investment physical process (page 36) ? When constructing a portfolio, investors need to conclude ? ? 1-8 Asset allocation ? election among handsome asset screenes protective cover selection ? Choice of which securities to hold inside asset class ? Security summary to value securities and take in investment attractor 1. 4. The Investment Process (page 37) ? 1-9 Portfolio strategies ? Top-down starts from asset allocation bottom-up starts from individual securities 1. 5. Markets are Competitive (page 37-39) ? Implications from no-free-lunch propose ? ? Risk-Return Trade-Off economic Markets (security prices have reflected all information) (Chapter 11-12) ? Passive counseling ? No prove to find undervalued securities ? No ? attempt to meter the market ? retention a highly diversified portfolio fighting(a) Management ? ? 1-10 finding mispriced securities Timing the market 1. 6. The Players (page 39-42) ? ? ? ? Business Firms net borrowersHouseholds net savers Governments can be twain borrowers and savers Financial Intermedi aries kitten and invest specie ? Investment Companies ? Banks ? insurance policy companies ? Credit unions 1-11 popular Bank Activities Investment Banking Underwrite impertinent stock and bond issues Sell freshly issued securities to public in the primary market Investors trade previously issued securities among themselves in the supplemental markets Commercial Banking top deposits and make loans 1-12 1. 7. Financial Crisis of 2008 Reading (page 42-51) 1-13