investment analysis and portfolio management 10th edition solutions pdf

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Investment analysis and portfolio management 10th edition solutions pdf andrzej haraburda forexworld

Investment analysis and portfolio management 10th edition solutions pdf

Financial risk is a function of the uncertainty introduced by the financing mix. Financial risk is measured in terms of a debt ratio e. Liquidity risk is the uncertainty an individual faces when he decides to buy or sell an investment. The two uncertainties involved are: 1 how long it will take to buy or sell this asset, and 2 what price will be received.

The liquidity risk on different investments can vary substantially e. Exchange rate risk is the uncertainty of returns on securities acquired in a different currency. The risk applies to the global investor or multinational corporate manager who must anticipate returns on securities in light of uncertain future exchange rates.

A good measure of this uncertainty would be the absolute volatility of the exchange rate or its beta with a composite exchange rate. Country risk is the uncertainty of returns caused by the possibility of a major change in the political or economic environment of a country. The analysis of country risk is much more subjective and must be based upon the history and current environment in the country. The increased use of debt increases the fixed interest payment.

Since this fixed contractual payment will increase, the residual earnings net income will become more variable. As to the locations of the five types of investments on the line, the U. Government bonds are perceived to be default risk-free but expose the U.

Low grade corporates contain business, financial, and liquidity risk but should be lower in risk than equities. Japanese stocks are riskier than U. Thus, for an investment to be desirable, it should have a return of 7. Both changes cause an increase in the required return on all investments. In addition, the increase in the rate of inflation will result in an increase in the nominal RFR.

Because both changes affect the nominal RFR, they will cause an equal increase in the required return on all investments of 5 percent. The graph should show a parallel shift upward in the capital market line of 5 percent. Such a change in the yield spread would imply a change in the market risk premium because, although the risk levels of bonds remain relatively constant, investors have changed the spreads they demand to accept this risk. In this case, because the yield spread risk premium declined, it implies a decline in the slope of the SML as shown in the following graph.

The ability to buy or sell an investment quickly without a substantial price concession is known as liquidity. A Treasury Bill can be bought or sold in minutes at a price almost identical to the quoted price. In contrast, an example of an illiquid asset would be a specialized machine or a parcel of real estate in a remote area. In both cases, it might take a considerable period of time to find a potential seller or buyer and the actual selling price could vary substantially from expectations.

The greater the variability of returns, the greater the difference between the arithmetic and geometric mean returns. The Lauren Computer Company presents greater risk as an investment because the range of possible returns is much wider. As an investor becomes more risk averse, the investor will require a larger risk premium to own common stock. As risk premium increases, so too will required rate of return. In order to achieve the higher rate of return, stock prices should decline. The required rate of return on common stock is equal to the risk-free rate plus a risk premium.

Therefore the approximate risk premium for common stocks implied by these data is:. An approximation would be. Standard deviation can be used as a good measure of relative risk between two investments that have the same expected rate of return. The coefficient of variation must be used to measure the relative variability of two investments if there are major differences in the expected rates of return. T-bills: 0. Common Stock: The average return of U.

Government T-Bills are riskless, therefore their risk premium would equal 0. The U. Common Stocks are subject to the following types of risk: business risk, financial risk, liquidity risk, exchange rate risk, and to a limited extent country risk. Government T-Bills, the arithmetic and geometric means are approximately equal. The geometric mean. Common Stocks is lower than the arithmetic mean.

The difference between the arithmetic and geometric means is larger, the larger the standard deviation of returns. In this phase, the investor is becoming more concerned with long-term needs of retirement or estate planning. The gifting phase is often concurrent with the spending phase. The individual believes that the portfolio will provide sufficient income to meet expenses, plus a reserve for uncertainties.

A policy statement is important for both the investor and the investment advisor. Student Exercise 6. The year old uncle and year old sister differ in terms of time horizon. However, each has some time before retirement 20 versus 30 years. These investors could also differ in current liquidity needs such as children, education expenses, etc.

Data on current investments, portfolio returns, and savings plans future additions to the portfolio are helpful, too. Student Exercise 9. At this point we know or can reasonably infer that Mr. If not, such a need can easily be met by minor portfolio adjustments. Tax minimization will be a continuing collateral goal. Risk Tolerance: Account circumstances and the long-term return goal suggest that the portfolio can take somewhat above average risk.

Franklin is acquainted with the nature of investment risk from his prior ownership of stocks and bonds, he has a still long actuarial life expectancy and is in good current health, and his heir - the foundation, thanks to his generosity - is already possessed of a large asset base. Constraints: Time Horizon: Even disregarding Mr.

Liquidity Requirement: Given what we know and the expectation of an ongoing income stream of considerable size, no liquidity needs that would require specific funding appear to exist. Taxes: Mr. Franklin is no doubt in the highest tax brackets, and investment actions should take that fact into account on a continuing basis.

Appropriate tax-sheltered investment standing on their own merits as investments should be considered. Tax minimization will be a specific investment goal. Legal and Regulatory: Investments, if under the supervision of an investment management firm i. Franklin himself will be governed by state law and the Prudent Person rule.

Unique Circumstances: The large asset total, the foundation as their ultimate recipient, and the great freedom of action enjoyed in this situation i. Given that stocks have provided and are expected to continue to provide higher riskadjusted returns than either bonds or cash, and considering that the return goal is for longterm, inflation-protected growth of the capital base, stocks will be allotted the majority position in the portfolio.

This is also consistent with Mr. It is likely that income will accumulate to some extent and, if so, will automatically build a liquid emergency fund for Mr. Franklin as time passes.

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The young individual is in the accumulation phase of the investment life cycle. In answering this question, one assumes that the year-old individual has adequate insurance coverage and a cash reserve. Depending on her income from social security, she may need some current income from her retirement portfolio to meet living expenses. At the same time, she will need to protect herself against inflation.

Investing in long-term investments, such as common stock mutual funds, would provide the investor with needed inflation protection. In the accumulating phase, the individual is accumulating net worth to satisfy short-term needs e. In this phase, the individual is willing to invest in moderately high-risk investments in order to achieve above-average rates of return. In the consolidating phase, an investor has paid off many outstanding debts and typically has earnings that exceed expenses.

In this phase, the investor is becoming more concerned with long-term needs of retirement or estate planning. The gifting phase is often concurrent with the spending phase. The individual believes that the portfolio will provide sufficient income to meet expenses, plus a reserve for uncertainties. A policy statement is important for both the investor and the investment advisor.

Student Exercise 6. The year old uncle and year old sister differ in terms of time horizon. However, each has some time before retirement 20 versus 30 years. These investors could also differ in current liquidity needs such as children, education expenses, etc. Student Exercise 9. At this point we know or can reasonably infer that Mr. If not, such a need can easily be met by minor portfolio adjustments. Thus, an inflation-adjusted enhancement of the capital base for the benefit of the foundation will be the primary return goal i.

Tax minimization will be a continuing collateral goal. Franklin is acquainted with the nature of investment risk from his prior ownership of stocks and bonds, he has a still long actuarial life expectancy and is in good current health, and his heir - the foundation, thanks to his generosity - is already possessed of a large asset base.

Constraints: Time Horizon: Even disregarding Mr. Liquidity Requirement: Given what we know and the expectation of an ongoing income stream of considerable size, no liquidity needs that would require specific funding appear to exist. Taxes: Mr. Franklin is no doubt in the highest tax brackets, and investment actions should take that fact into account on a continuing basis.

Appropriate tax-sheltered investment standing on their own merits as investments should be considered. Tax minimization will be a specific investment goal. Legal and Regulatory: Investments, if under the supervision of an investment management firm i. Franklin himself will be governed by state law and the Prudent Person rule.

Unique Circumstances: The large asset total, the foundation as their ultimate recipient, and the great freedom of action enjoyed in this situation i. Given that stocks have provided and are expected to continue to provide higher risk- adjusted returns than either bonds or cash, and considering that the return goal is for long- term, inflation-protected growth of the capital base, stocks will be allotted the majority position in the portfolio.

This is also consistent with Mr. It is likely that income will accumulate to some extent and, if so, will automatically build a liquid emergency fund for Mr. Franklin as time passes. Franklin, no further allocation to this asset class is made. It should be noted that the warehouse is a source of cash flow, a diversifying asset and, probably, a modest inflation hedge.

For tax reasons, Mr. Franklin may wish to consider putting some debt on this asset, freeing additional cash for alternative investment use. International securities will be included in both areas, primarily for their diversification benefits. Municipal bonds will be included in the fixed income area to minimize income taxes.

There is no need to press for yield in this situation, nor any need to deliberately downgrade the quality of the issues utilized. Fixed Income 10 — 20 15 Non-U. Fixed Income 5 — 15 10 U. An alternate allocation could well be weighted more heavily to U. An unmarried individual should have coverage equal to at least 7 times salary, whereas a married individual with two children should have more coverage possibly times salary.

The major advantage of investing in common stocks is that generally an investor would earn a higher rate of return than on corporate bonds. The main disadvantage of common stock ownership is the higher risk. While the income on bonds is certain except in the extreme case of bankruptcy , the return on stocks will vary depending upon the future performance of the company and could well be negative.

The three factors are: 1 Limiting oneself to the U. While U. International diversification reduces portfolio risk because of the low correlation of returns among the securities from different countries. This is due to differing international trade patterns, economic growth, fiscal policies, and monetary policies among countries. There are different correlations of returns between securities from the U.

The correlations between U. Factors influencing the correlations include international trade, economic growth, fiscal policy and monetary policy. A change in any of these variables will cause a change in how the economies are related. For example, the correlation between U.

The major risks that an investor must consider when investing in any bond issue are business risk, financial risk and liquidity risk. Additional risk associated with foreign bonds, such as Japanese or German bonds, are exchange rate risk and country risk.

Country risk is not a major concern for Japanese or German securities. Exchange rate risk is the uncertainty that arises from floating exchange rates between the U. The additional risks that some investors believe international investing introduces include foreign exchange risk and country risk. For example, the domestic return on Canada bonds of The exchange rate effect of Exhibit 3. There are four alternatives to direct investment in foreign stocks available to investors: 1 purchase American Depository Receipts ADRs 2 purchase of American shares issued by a transfer agent 3 direct purchase of foreign shares listed on a foreign or U.

Unlike corporate bonds, interest on municipal bonds is exempt from taxation by the federal government and by the state that issued the bond, provided the investor is a resident of that state. For instance, a marginal tax rate of 35 percent means that a regular bond with an interest rate of 8 percent yields a net return after taxes of only 5. A tax-free bond with a 6 percent yield would be preferable.

The convertible bond of the growth company would have the lower yield. This is intuitive because there is a greater potential for the price of the growth company stock to increase, which would make the conversion feature of the bond extremely attractive.

Thus, the investor would be willing to trade off the higher upside potential resulting from conversion for the lower yield. Liquidity is the ability to buy or sell an asset quickly at a price similar to the prior price assuming no new information has entered the market. Common stocks have the advantage of liquidity since it is very easy to buy or sell a small position there being a large number of potential buyers at a price not substantially different from the current market price.

Raw land is relatively illiquid since it is often difficult to find a buyer immediately and often the prospective buyer will offer a price that is substantially different from what the owner considers to be the true market value.

A reason for this difference is that while common stock data are regularly reported in a large number of daily newspapers and several magazines and closely watched by a large number of individuals, raw land simply lacks this kind of interest. Further, the speculative nature of raw land investment calls for high risk and longer maturity before profits can be realized. Finally, the initial investment on a plot of raw land would be substantially greater than a round lot in most securities.

As a result, the small investor is generally precluded from this kind of investment. Warrants typically have a life of several years and could even by perpetual. A call option is similar to a stock warrant with two essential differences. The second difference is that a call option generally has a maturity of less than a year. Art and antiques are considered illiquid investments because in most cases they are sold at auctions.

Besides, many buyers of art and antiques are accumulators rather than traders and this further reduces trading. There is no such publication of current market prices of the numerous unique pieces of art and antiques and owners are forced to rely on dealer estimates.

Further, while a coin or stamp can be readily disposed of to a dealer at a commission of about percent, the commissions on paintings range from percent. Cost of trading stocks varies depending on whether the trade is handled by a full service broker or a discount broker. The results of Exhibit 3. The table indicates a low positive correlation with U. However, such markets tend to be less liquid than markets of developed countries.

The geometric mean for American paintings In addition, risk as measured by standard deviation, was lower for American paintings CFA Examination I 16 a. International stocks versus U. Information about foreign firms is often difficult to obtain on a timely basis and once obtained, can be difficult to interpret and analyze due to language and presentation differences. Financial statements are comparable from country to country.

Different countries use different accounting principles. Even when similar accounting methods are used, cultural, institutional, political and tax differences can make cross-country comparisons hazardous and misleading. Stock valuation techniques useful in the United States may be less useful in other countries.

Stock markets in different countries value different attributes. Smith must consider currency risk in selecting non-U. Increased costs: custody, management fees, and transactions expenses are usually higher outside the United States. Arguments in favor of adding international securities include: 1. Expected higher returns at the same or lower if properly diversified level of portfolio risk. Improved asset allocation flexibility, including the ability to match or hedge non-U.

Wider range of industry and company choices for portfolio construction purposes. Wider range of managers through whom to implement investment decisions. Diversification benefits are realizable despite the absence of non-U. At the same time, there are a number of potential problems associated with moving away from a domestic-securities-only orientation: 1.

Possible higher costs, including those for custody, transactions, and management fees. Possibly reduced liquidity, especially when transacting in size. Possible unsatisfactory levels of information availability, reliability, scope, timeliness and understand-ability.

Possible tax consequences or complications. Recognition that EAFE has underperformed since A policy decision to include international securities in an investment portfolio is a necessary first step to actualization. However, certain other policy level decisions must be made prior to implementation.

That set of decisions would include: 1. What portion of the portfolio shall be invested internationally, and in what equity and fixed-income proportions? Shall all or a portion of the currency risk be hedged or not? Shall management of the portfolio be active or passive?

What benchmarks shall results be judged by? How will manager style be incorporated into the process? Until decisions on these additional policy-level issues have been made, implementation of the basic decision to invest internationally cannot begin. Student Exercise 2. Student Exercise 3.

Student Exercise 4. Student Exercise 5. CFA Examination Adapted 5 a. The arithmetic average assumes the presence of simple interest, while the geometric average assumes compounding or interest-on-interest.

The geometric mean internal rate of return is a critical concept in security and portfolio selection as well as performance measurement in a multi-period framework. Bond This method provides a ranking almost identical to the prior method with the 4th and 5th rankings reversed: 1 - Real Estate Bonds The ranking using this measure would be as follows: 1 - Real Estate The arithmetic mean was used in this computation; however, the geometric mean also could be used to calculate this ranking.

Expected mean plus or minus two standard deviations: Arithmetic: Since the mean minus two standard deviations 9. It seems at first that government bonds offer less return and more risk than real estate. However, real estate and government bonds might provide a good combination if the two do not fluctuate in a similar fashion, so that the variability of the portfolio is less than the variability of the individual investments. If the correlation coefficient applicable to this pair of investments is known and is not highly positive, the combination would be advantageous.

Thus, even though the two companies produce similar products, their historical returns suggest that holding both of these securities would help reduce risk through diversification. While it generally has a physical location it need not necessarily have one. A good market should provide accurate information on the price and volume of past transactions, and current supply and demand.

Clearly, there should be rapid dissemination of this information. The costs of transferring ownership and middleman commissions should be low. Finally, the prevailing price should reflect all available information. This is a good discussion question for class because you could explore with students what are some of the alternatives that are used by investors with regards to other assets such as art and antiques.

Some possibilities are ads in the paper of your local community or large cities. Another obvious alternative is an auction. With an ad you would have to specify a price or be ready to negotiate with a buyer. With an auction you would be very uncertain of what you would receive.

In all cases, there would be a substantial time problem. Liquidity is the ability to sell an asset quickly at a price not substantially different from the current market assuming no new information is available. An antique is illiquid since it is relatively difficult to find a buyer and then you are uncertain as to what price the prospective buyer would offer. The primary market in securities is where new issues are sold by corporations to acquire new capital via the sale of bonds, preferred stock or common stock.

The sale typically takes place through an investment banker. The secondary market is simply trading in outstanding securities. It involves transactions between owners after the issue has been sold to the public by the company. Consequently, the proceeds from the sale do not go to the company, as is the case with a primary offering. Thus, the price of the security is important to the buyer and seller.

The functioning of the primary market would be seriously hampered in the absence of a good secondary market. Thus, investors would be reluctant to acquire securities in the primary market if they felt they would not subsequently have the ability to sell the securities quickly at a known price. An example of an initial public offering IPO would be a small company selling company stock to the public for the first time. By contrast, a seasoned equity refers to an established company, such as IBM, offering a new issue of common stock to an existing market for the stock.

The IPO involves greater risk for the buyer because there is not an established secondary market for the small firm. Without an established secondary market the buyer incurs additional liquidity risk associated with the IPO.

Student Exercise 7. In competitive bid the issuer is responsible for specifying the type of security to be offered, the timing, etc. The high bids will be awarded the contracts. Negotiated relationships are contractual arrangements between an underwriter and the issuer wherein the underwriter helps the issuer prepare the bond issue with the understanding that they have the exclusive right to sell the issue.

The three main factors that would account for the changes in the price of a seat on the New York Stock Exchange are the relative stature of the NYSE, the large trading volume relative to other exchanges and the general performance of the stock market. One reason for the existence of regional exchanges is that they provide trading facilities for geographically local companies that do not qualify for listing on a national exchange.

Second, they list national firms thus providing small local brokerage firms that are not members of a national exchange the opportunity to trade in securities that are listed on a national exchange. The essential difference between the national and regional exchanges is that the regional exchanges have less stringent listing requirements, thus allowing small firms to obtain listing.

The OTC market is larger than the listed exchanges in terms of the number of issues traded, almost 7, issues are traded on the OTC market compared to 3, stock issues common and preferred for the NYSE. It is a median quote that is representative of the quotes of the several market makers in the particular security.

Level 2 is for serious traders who desire not only current trends but also specific quotes of different market makers. This enables the broker to make a deal with the market maker offering the best price. It enables all quotes by all market makers to be immediately available.

The third market is the OTC trading of exchange-listed securities. It enables the non- members of the exchange to trade in exchange listed securities. Most of the large institutional favorites are traded on the third market - e. The fourth market is the direct trading between two parties without a broker intermediary.

Institutions trade in the fourth market since these trades are large volume and consequently substantial savings can be made by trading directly with a buyer, thus avoiding commissions. A market order implies the investor wants the transaction completed quickly at the prevailing price.

A limit order specifies a maximum price that the individual will pay to purchase the stock or the minimum he will accept to sell it. A short sale is the sale of stock that is not currently owned by the seller with the intent of purchasing it later at a lower price. This is done by borrowing the stock from another investor through a broker. A stop-loss order is a conditional order whereby the investor indicates that he wants to sell the stock if the price drops to a specified price, thus protecting himself from a large and rapid decline in price.

The specialist acts as a broker in handling limit orders placed with member brokers. Being constantly in touch with current prices, he is in a better position to execute limit orders since it is entered in his books and executed as soon as appropriate. Second, he maintains a fair and orderly market by trading on his own account when there is inadequate supply or demand. If the spread between the bid and ask is substantial, he can place his own bid or ask in order to narrow the spread.

This helps provide a continuous market with orderly price changes. The specialist obtains income from both his functions: commissions as a broker, and outperforming the market in his dealer function using the monopolistic information he has on limit orders. The Saitori members are referred to as intermediary clerks.

Similar to the U. Their duties entail matching buy and sell orders for the regular members of the Tokyo Exchange and they maintain the book for regular limit orders. Unlike the U. Much of the change experienced on the secondary equity market can be attributed to changes occurring within the financial industry as a whole. As banks, insurance companies, investment companies and other financial service firms enter the capital markets, the volume and size of transactions continue to grow.

This dominance by large institutions in the marketplace caused the following changes in the markets: 1 the imposition of negotiated competitive commission rates 2 the influence of block trades 3 the impact of stock price volatility 4 the development of a national market system These changes have increased the competition among firms that trade large institutional stocks.

The evolving globalization of markets will also have an impact. Typically, these other brokerage firms provided research or sales services to the institution. A block house is a brokerage firm, either member or non-member of an exchange, which stands ready to buy or sell a block for institutions. Block houses evolved because institutions were not getting what they needed from the specialist and, hence, asked institutional brokerage firms to locate other institutions with an interest in buying or selling given blocks.

When an institution wishes to sell a stock it typically contacts a block house, who contacts prospective institutional buyers. If the block house does not find buyers for the entire block, it buys the remainder thus taking a position with the hope of selling it later. Naturally, the block house assumes substantial risk on this position because of the uncertainty of subsequent price changes. Though the exact form of the National Market System NMS remains nebulous, major features of such a market are: 1 Centralized reporting of all transactions regardless of where the trade took place.

Currently, this exists for all NYSE stocks. This increased information is beneficial to the investor. The Inter-Market Trading System ITS is a centralized quotation system, currently available, consisting of a central computer facility with interconnected terminals in the participating market centers. Brokers and market-makers in each market center can indicate to those in other centers specific buying and selling commitments by way of a composite quotation display.

While ITS provides the centralized quotation system that is necessary for a National Market System NMS , it does not have the capability for automatic execution at the best market; it is necessary to contact the market-maker and indicate that you want to buy or sell at his bid or ask. The data in Exhibit 4. The volume of shares traded and the size of the trades continued to grow through Value - Ending Value - Dividends -Trans.

The purpose of market indicator series is to provide a general indication of the aggregate market changes or market movements. More specifically, the indicator series are used to derive market returns for a period of interest and then used as a benchmark for evaluating the performance of alternative portfolios.

A second use is in examining the factors that influence aggregate stock price movements by forming relationships between market series movements and changes in the relevant variables in order to illustrate how these variables influence market movements.

A further use is by technicians who use past aggregate market movements to predict future price patterns. Finally, a very important use is in portfolio theory, where the systematic risk of an individual security is determined by the relationship of the rates of return for the individual security to rates of return for a market portfolio of risky assets.

Here, a representative market indicator series is used as a proxy for the market portfolio of risky assets. A characteristic that differentiates alternative market indicator series is the sample - the size of the sample how representative of the total market it is and the source whether securities are of a particular type or a given segment of the population NYSE, TSE.

The weight given to each member plays a discriminatory role - with diverse members in a sample, it would make a difference whether the series is price-weighted, value-weighted, or unweighted. Finally, the computational procedure used for calculating return - i. A price-weighted series is an unweighted arithmetic average of current prices of the securities included in the sample - i.

A value-weighted index begins by deriving the initial total market value of all stocks used in the series market value equals number of shares outstanding times current market price. The initial value is typically established as the base value and assigned an index value of Subsequently, a new market value is computed for all securities in the sample and this new value is compared to the initial value to derive the percent change which is then applied to the beginning index value of Given a four security series and a 2-for-1 split for security A and a 3-for-1 split for security B, the divisor would change from 4 to 2.

The adjustment for a value-weighted series due to a stock split is automatic. The decrease in stock price is offset by an increase in the number of shares outstanding. An alternative treatment is to compute percentage changes for each stock and derive the average of these percentage changes.

The high correlations between returns for alternative NYSE price indicator series can be attributed to the source of the sample i. Even so, there is strong correlation between the series because of similarity of types of companies. Since the equal-weighted series implies that all stocks carry the same weight, irrespective of price or value, the results indicate that on average all stocks in the index increased by 23 percent.

On the other hand, the percentage change in the value of a large company has a greater impact than the same percentage change for a small company in the value weighted index. Therefore, the difference in results indicates that for this given period, the smaller companies in the index outperformed the larger companies. The bond-market series are more difficult to construct due to the wide diversity of bonds available.

Also bonds are hard to standardize because their maturities and market yields are constantly changing. In order to better segment the market, you could construct five possible subindexes based on coupon, quality, industry, maturity, and special features such as call features, warrants, convertibility, etc. Since the Merrill Lynch-Wilshire Capital Markets index is composed of a distribution of bonds as well as stocks, the fact that this index increased by 15 percent, compared to a 5 percent gain in the Wilshire Index indicates that bonds outperformed stocks over this period of time.

The Russell and Russell represent two different samples of stocks, segmented by size. The fact that the Russell which is composed of the smallest 2, stocks in the Russell increased more than the Russell composed of the largest capitalization U. One would expect that the level of correlation between the various world indexes should be relatively high.

These indexes tend to include the same countries and the largest capitalization stocks within each country. The percentage change for the price-weighted series is a simple average of the differences in price from one period to the next. Equal weights are applied to each price change. These weights are the relative market values for each stock. Thus, Stock C carries the greatest weight followed by B and then A.

Because Stock C had the greatest percentage increase and the largest weight, it is easy to see that the percentage change would be larger for this series than the price-weighted series. This is what you would expect since Part A represents the percentage change of an equal-weighted series and Part B applies an equal weight to the separate stocks in calculating the arithmetic average.

Geometric average is the nth root of the product of n items. This is because variability of return has a greater affect on the arithmetic average than the geometric average. Student Exercise 4 a. Since the index is a price-weighted average, the higher priced stocks carry more weight. But when a split occurs, the new divisor ensures that the new value for the series is the same as it would have been without the split.

Hence, the main effect of a split is just a repositioning of the relative weight that a particular stock carries in determining the index. Student Exercise 5 a. The market values are unchanged due to splits and thus stock splits have no effect. The index, however, is weighted by the relative market values.

There are several reasons why one would expect capital markets to be efficient, the foremost being that there are a large number of independent, profit-maximizing investors engaged in the analysis and valuation of securities. A second assumption is that new information comes to the market in a random fashion. The third assumption is that the numerous profit- maximizing investors will adjust security prices rapidly to reflect this new information.

Thus, price changes would be independent and random. Capital markets as a whole are generally expected to be efficient, but the markets for some securities might not be as efficient as others. Recall that markets are expected to be efficient because there are a large number of investors who receive new information and analyze its effect on security values.

If there is a difference in the number of analysts following a stock and the volume of trading, one could conceive of differences in the efficiency of the markets. For example, new information regarding actively traded stocks such as IBM and Exxon is well publicized and numerous analysts evaluate the effect. Therefore, one should expect the prices for these stocks to adjust rapidly and fully reflect the new information.

On the other hand, new information regarding a stock with a small number of stockholders and low trading volume will not be as well publicized and few analysts follow such firms. Therefore, prices may not adjust as rapidly to new information and the possibility of finding a temporarily undervalued stock are also greater.

Some also argue that the size of the firms is another factor to differentiate the efficiency of stocks. Specifically, it is believed that the markets for stocks of small firms are less efficient than that of large firms. The weak-form efficient market hypothesis contends that current stock prices reflect all available security-market information including the historical sequence of prices, price changes, and any volume information.

The implication is that there should be no relationship between past price changes and future price changes. Therefore, any trading rule that uses past market data alone should be of little value. The two groups of tests of the weak-form EMH are 1 statistical tests of independence and 2 tests of trading rules.

Statistical tests of independence can be divided further into two groups: the autocorrelation tests and the runs tests. The autocorrelation tests are used to test the existence of significant correlation, whether positive or negative, of price changes on a particular day with a series of consecutive previous days.

The runs tests examine the sequence of positive and negative changes in a series and attempt to determine the existence of a pattern. If there are too few runs i. In the trading rule studies, the second major set of tests, investigators attempted to examine alternative technical trading rules through simulation.

The trading rule studies compared the risk-return results derived from the simulations, including transaction costs, to results obtained from a simple buy-and-hold policy. The semistrong-form efficient market hypothesis contends that security prices adjust rapidly to the release of all new public information and that stock prices reflect all public information. The semistrong-form goes beyond the weak-form because it includes all market and also all nonmarket public information such as stock splits, economic news, political news, etc.

Using the organization developed by Fama, studies of the semistrong-form EMH can be divided into two groups: 1 Studies that attempt to predict futures rates of return using publicly available information goes beyond weak-form EMH.

These studies involve either time-series analysis of returns or the cross-section distribution of returns. These studies determine whether it is possible to make average risk-adjusted profits by acting after the information is made public. The CAPM is grounded in the theory that investors demand higher returns for higher risks.

As a result of risks specific to each individual security, the announcement of a significant economic event will tend to affect individual stock prices to a greater or lesser extent than the market as a whole. We will define the abnormal return ARit as the actual return minus the expected return. This abnormal return surrounding an economic event can be used to determine the effect of the event on the individual security.

First, only use information or data that is publicly available at the time of the decision. As an example, if you use information that is typically not available until six weeks after a period and you assume you have it four weeks after, your investment results should be superior because you implicitly have prior information. Second, account for all transactions costs for the trading rule. Third, be sure to adjust all results for the risk involved because many trading rules will tend to select high-risk stocks that will have higher returns.

A number of studies have examined the adjustment of stock prices to major world events. These studies analyzed the effect of several unexpected world events on stock prices - namely, whether prices adjusted before or during the announcement or after it. The results consistently showed that the adjustments took place between the close of the previous day and the opening of the subsequent day.

Notably, an investor could not derive above average profits from transacting after the news became public, thus supporting the semistrong-form EMH. In the early s, several studies were performed that examined quarterly earnings reports. The results of the studies provided evidence against the semistrong-form EMH. Specifically, buying a stock after a report of unexpected higher quarterly earnings was profitable.

Generally, the abnormal return for the stock occurred 13 or 26 weeks following the earnings announcement and reflected the size of the unanticipated earnings change. These tests involve a joint hypothesis because they consider not only the efficiency of the market, but also are dependent on the asset pricing model that provides the measure of risk used in the test.

For example, if a test determines that it is possible to predict future differential risk-adjusted returns, the results could either have been caused by the market being inefficient or because the risk measure is bad thereby providing an incorrect risk- adjusted return.

The strong-form efficient market hypothesis asserts that stock prices fully reflect all information, whether public or private. It goes beyond the semistrong-form because it requires that no group of investors have a monopolistic access to any information. Thus, the strong-form efficient market hypothesis calls for perfect markets in which all information is available to everyone at the same time. The strong-form efficient market hypothesis goes beyond the semistrong-form in that it calls for perfect markets - i.

Thus, tests for the strong-form efficient market hypothesis would center around examining whether any group has a monopolistic access to information and can consistently obtain above average profits by using it. Four groups of investors have been featured in these tests - corporate insiders, the stock exchange specialist, security analysts and professional money managers. In the early s, a study by the Securities and Exchange Commission found that by having access to the limit order books as his source of monopolistic information, coupled with low transaction costs, the stock market specialist consistently obtained above average returns.

This is evidence against the strong-form hypothesis because this group apparently has a monopoly source of information and uses it to derive above normal returns. Studies by several authors examined the risk-adjusted performance of professional money managers for various periods and found support for the strong-form efficient market hypothesis. For example, a historical study of mutual fund money managers found that on a risk-adjusted basis, only about one-third of the funds outperformed the market.

More recent studies have also generally provided similar results on performance. The goal of behavioral finance is to understand how psychological decisions affect markets and to be able to predict those effects. Behavioral finance looks to explain anomalies that can arise in markets due to psychological factors. The proponents of behavioral finance contend that, although standard finance theory is acceptable in that it focuses on aggregate market behavior, it is incomplete because it fails to account for individual behavior.

The basic premise of technical analysis is that the information dissemination process is slow- thus the adjustment of prices is not immediate but forms a pattern. This view is diametrically opposed to the concept of efficient capital markets, which contends that there is a rapid dissemination process and, therefore, prices reflect all information.

Thus, there would be no value to technical analysis because technicians act after the news is made public which would negate its value in an efficient market. The proponents of fundamental analysis advocate that at one point in time there is a basic intrinsic value for the aggregate stock market, alternative industries, and individual securities and if this intrinsic value is substantially different from the prevailing market value, the investor should make the appropriate investment decision.

Alternatively, if the fundamental analyst makes superior projections of the relevant variables influencing stock prices then, in accordance with the efficient market hypothesis, he could expect to outperform the market. The implication is that even with an excellent valuation model, if you rely solely on past data, you cannot expect to do better than a buy-and-hold policy. To be superior in an efficient market the analyst must be aware of the relevant variables influencing stock prices, and be able to consistently project these accurately.

If the analyst does not have access to inside information and lacks superior analytical ability, there is little likelihood of obtaining above average returns consistently. To establish the superiority of an analyst it is appropriate to examine the performance of numerous buy and sell recommendations by the analyst over a period of time relative to a randomly selected sample of stocks in the same risk class. To be superior the analyst must consistently perform better than the random selection.

Consistency is emphasized because on average you would expect random selection to outperform the market about half the time. Superior analysts should concentrate their efforts in the second tier of stocks, because they do not receive the attention given the top-tier stocks. Analysts should concentrate their efforts on these securities, since they are more likely to yield abnormal returns.

The major efforts of the portfolio manager should be directed toward determining the risk preferences of his clients and offering, accordingly, a portfolio approximating the risk and return desires of the clientele. Given evidence of the stationarity of beta for a portfolio, this would not be a difficult task.

Second, the portfolio manager should attempt to achieve complete diversification - eliminate all unsystematic risk. Thus, the portfolio should be highly correlated with the market portfolio of risky assets. Finally, it is important to minimize transactions costs - minimize taxes for the client, minimize commissions by reducing trading turnover, and minimizing liquidity costs by only trading currently liquid stocks. Index funds are security portfolios specially designed to duplicate the performance of the overall security market as represented by some selected market index series.

The first group of index funds was created in the early s because people started realizing that capital markets are efficient and it is extremely difficult to be a superior analyst. An abundance of research has revealed that the performance of professional money managers is not superior to the market, and often has been inferior.

This is precisely what one would expect in an efficient capital market. If you match the market and minimize transactions costs you will beat two-thirds of the institutional portfolio managers on average. The index funds are intended to match the market and minimize costs as suggested above. Thus, they are consistent with the EMH. The portfolio manager should continue to allow his two superior analysts to make investment recommendations for some proportion of the portfolio, making sure that their recommendations are implemented in a way that would conform to the risk preference of the client.

They should also be encouraged to concentrate their efforts in the second tier of stocks, because the second tier is probably not as efficient as the top tier because of lower trading volume and the possibility of finding a temporarily undervalued security are greater. On the other hand, the portfolio manager should encourage the average and inferior analysts to direct their efforts to matching the performance of the aggregate market.

As a result, the overall performance of the portfolio should be superior to the average market performance. Each of these trends implies that there are a large number of independent, profit-maximizing investors in the European equity markets, promoting efficiency through continuous analyses of new information. Each of these tests checks for independence between stock price changes over time.

The Wall Street Journal lists stock prices for the Tokyo market on a daily basis, and serves as an easy source from which to get the required data. CFA Examination I 25 a. The notion that stock prices already reflect all available information is referred to as the efficient market hypothesis EMH. It is common to distinguish among three versions of the EMH: the weak, semi-strong, and strong forms.

Past stock prices are publicly available and virtually costless to obtain. If such data ever conveyed reliable signals about future stock performance, all investors would have learned to exploit such signals. Such information includes, in addition to past prices, all fundamental data on the firm, its product, its management, its finances, its earnings, etc.

For weak-form or the semi-strong forms of the hypothesis to be valid does not require the strong-form version to hold. If the strong-form version was valid, however, both the semi- strong and the weak-form versions of efficiency would also be valid.

Even in an efficient market, a portfolio manager would have the important role of constructing and implementing an integrated set of steps to create and maintain appropriate combinations of investment assets. Listed below are the necessary steps in the portfolio management process.

Counseling the client to help the client to determine appropriate objectives and identify and evaluate constraints. Monitoring and evaluating capital market expectations. Investment policies are set and implemented through the choice of optimal combinations of financial and real assets in the marketplace - i. Under the assumption of a perfectly efficient market, stocks would be priced fairly, eliminating any added value by specific security selection.

It might be argued that an investment policy which stresses diversification is even more important in an efficient market, context because the elimination of specific risk becomes extremely important. Portfolio adjustments are made as a result of significant changes in any or all relevant variables. Specifically, they found little relation between beta and average stock returns over the year period although there were some sub- periods when a positive relationship was indicated.

They found no relation between beta and average return over this period; on the other hand, a combination of book-to-market and size factors did explain differences in those average returns. If asset pricing is rational and the Fama and French research is valid, performance i.

This suggests that the predictive ability of CAPM, and hence the validity of beta, is questionable. Often, the results have been taken as strong evidence of market inefficiencies and the opportunity to create attractive investment management products. However, these simple variable effects are not independent; rather there may be a complex web of interrelationships underlying a host of different variables.

As computer power has become more available and databases more extensive, researches have been able to test several variables simultaneously, rather than just one variable in isolation, often using a multiple regression framework.

Jacobs and Levy, for example, studied a total of 25 separate anomaly measures, together with industry effects, and did so simultaneously. To make them credible would require further research using a more robust model design to see if the results hold up.

Thus, he failed to account for companies that may have left the list during the backtest period due to bankruptcy affecting his negative returns or that may have been merged out of existence affecting his positive returns. Look-Ahead Bias - It is not clear that Max used only that information that was available to all investors at the time that the ranking process implied it was.

Ignoring the Real World - There is no indication that Max took account of such real-world factors tending to reduce realized returns as turnover, commissions, market impact, implementation shortfalls or fees. In combination, these cost-producing factors could well have significantly lowered-or even eliminated-the potential for excess returns.

Time Period - Five years may be too short of a time to have back tested the model. Holdout Sample - Max apparently found the anomaly by looking over the past five years of data. He should use a different time period as a holdout sample to test his model.

Market efficiency - Although the anomaly occurred in the past, it may not occur in the future. Buying activity by TMP and other money managers who have discovered this anomaly may drive the price of low price-to-cash-flow stocks up, causing the abnormal returns to dissipate. Data Mining - Max may have investigated hundreds of potential anomalies and found a few that worked.

Efficient market hypothesis EMH states that a market is efficient if security prices immediately and fully reflect all available relevant information. Efficient means informationally efficient, not operationally efficient. Operational efficiency deals with the cost of transferring funds.

If the market fully reflects information, the knowledge that information would not allow anyone to profit from it because stock prices already incorporate the information. Weak form asserts that stock prices already reflect all information that can be derived by examining market trading data such as the history of past prices and trading volume. Empirical evidence supports the weak-form. A strong body of evidence supports weak-form efficiency in the major U.

For example, test results suggest that technical trading rules do not produce superior returns after adjusting for transaction costs and taxes. Examples of publicly available information are annual reports of companies and investment data. Evidence strongly supports the notion of semi-strong efficiency, but occasional studies e. Strong form of EMH holds that current market prices reflect all information, whether publicly available or privately held, that is relevant to the firm. Empirical evidence does not support the strong form.

Empirical evidence suggests that strong-form efficiency does not hold. If this form were correct, prices would fully reflect all information, although a corporate insider might exclusively hold such information. Therefore, insiders could not earn excess returns. Research evidence shows that corporate officers have access to pertinent information long enough before public release to enable them to profit from trading on this information.

Technical analysis in the form of charting involves the search for recurrent and predictable patterns in stock prices to enhance returns. The EMH implies that this type of technical analysis is without value. If past prices contain no useful information for predicting future prices, there is no point in following any technical trading rule for timing the purchases and sales of securities.

According to weak-form efficiency, no investor can earn excess returns by developing trading rules based on historical price and return information. A simple policy of buying and holding will be at least as good as any technical procedure. Tests generally show that technical trading rules do not produce superior returns after making adjustments for transactions costs and taxes.

Fundamental analysis uses earnings and dividend prospects of the firm, expectations of future interest rates, and risk evaluation of the firm to determine proper stock prices. The EMH predicts that most fundamental analysis is doomed to failure. According to semi-strong form efficiency, no investor can earn excess returns from trading rules based on any publicly available information.

Only analysts with unique insight receive superior returns. Fundamental analysis is no better than technical analysis in enabling investors to capture above-average returns. However, the presence of many analysts contributes to market efficiency. In summary, the EMH holds that the market appears to adjust so quickly to information about individual stocks and the economy as a whole that no technique of selecting a portfolio - using either technical or fundamental analysis - can consistently outperform a strategy of simply buying and holding a diversified group of securities, such as those making up the popular market averages.

Portfolio managers have several roles or responsibilities even in perfectly efficient markets. The most important responsibility is to: 1. Other roles and responsibilities include: 2. Developing a well-diversified portfolio with the selected risk level. Although an efficient market prices securities fairly, each security still has firm-specific risk that portfolio managers can eliminate through diversification.

Reducing transaction costs with a buy-and-hold strategy. Proponents of the EMH advocate a passive investment strategy that does not try to find under-or-overvalued stocks. A buy-and-hold strategy is consistent with passive management. Because the efficient market theory suggests that securities are fairly priced, frequently buying and selling securities, which generate large brokerage fees without increasing expected performance, makes little sense.

One common strategy for passive management is to create an index fund that is designed to replicate the performance of a broad-based index of stocks. Besides, the demand for business loans would be greatest during the early and middle part of the business cycle. The five factors that influence the risk premium on an investment are business risk, financial risk, liquidity risk, exchange rate risk, and country risk.

Business risk is a function of sales volatility and operating leverage and the combined effect of the two variables can be quantified in terms of the coefficient of variation of operating earnings. Financial risk is a function of the uncertainty introduced by the financing mix. Financial risk is measured in terms of a debt ratio e. Liquidity risk is the uncertainty an individual faces when he decides to buy or sell an investment. The two uncertainties involved are: 1 how long it will take to buy or sell this asset, and 2 what price will be received.

The liquidity risk on different investments can vary substantially e. Exchange rate risk is the uncertainty of returns on securities acquired in a different currency. The risk applies to the global investor or multinational corporate manager who must anticipate returns on securities in light of uncertain future exchange rates.

A good measure of this uncertainty would be the absolute volatility of the exchange rate or its beta with a composite exchange rate. Country risk is the uncertainty of returns caused by the possibility of a major change in the political or economic environment of a country. The analysis of country risk is much more subjective and must be based upon the history and current environment in the country. The increased use of debt increases the fixed interest payment. Since this fixed contractual payment will increase, the residual earnings net income will become more variable.

As to the locations of the five types of investments on the line, the U. Government bonds are perceived to be default risk-free but expose the U. Low grade corporates contain business, financial, and liquidity risk but should be lower in risk than equities. Japanese stocks are riskier than U. Thus, for an investment to be desirable, it should have a return of 7. Both changes cause an increase in the required return on all investments. In addition, the increase in the rate of inflation will result in an increase in the nominal RFR.

Because both changes affect the nominal RFR, they will cause an equal increase in the required return on all investments of 5 percent. The graph should show a parallel shift upward in the capital market line of 5 percent. Such a change in the yield spread would imply a change in the market risk premium because, although the risk levels of bonds remain relatively constant, investors have changed the spreads they demand to accept this risk.

In this case, because the yield spread risk premium declined, it implies a decline in the slope of the SML as shown in the following graph. The ability to buy or sell an investment quickly without a substantial price concession is known as liquidity. A Treasury Bill can be bought or sold in minutes at a price almost identical to the quoted price. In contrast, an example of an illiquid asset would be a specialized machine or a parcel of real estate in a remote area.

In both cases, it might take a considerable period of time to find a potential seller or buyer and the actual selling price could vary substantially from expectations. The greater the variability of returns, the greater the difference between the arithmetic and geometric mean returns. The Lauren Computer Company presents greater risk as an investment because the range of possible returns is much wider. As an investor becomes more risk averse, the investor will require a larger risk premium to own common stock.

As risk premium increases, so too will required rate of return. In order to achieve the higher rate of return, stock prices should decline. The required rate of return on common stock is equal to the risk-free rate plus a risk premium. Therefore the approximate risk premium for common stocks implied by these data is:. An approximation would be.

Standard deviation can be used as a good measure of relative risk between two investments that have the same expected rate of return. The coefficient of variation must be used to measure the relative variability of two investments if there are major differences in the expected rates of return. T-bills: 0. Common Stock: The average return of U. Government T-Bills are riskless, therefore their risk premium would equal 0.

The U. Common Stocks are subject to the following types of risk: business risk, financial risk, liquidity risk, exchange rate risk, and to a limited extent country risk. Government T-Bills, the arithmetic and geometric means are approximately equal.

IS FOREX A GOOD BROKER

The increased use of debt increases the fixed interest payment. Since this fixed contractual payment will increase, the residual earnings net income will become more variable. As to the locations of the five types of investments on the line, the U. Government bonds are perceived to be default risk-free but expose the U. Low grade corporates contain business, financial, and liquidity risk but should be lower in risk than equities.

Japanese stocks are riskier than U. Thus, for an investment to be desirable, it should have a return of 7. Both changes cause an increase in the required return on all investments. In addition, the increase in the rate of inflation will result in an increase in the nominal RFR. Because both changes affect the nominal RFR, they will cause an equal increase in the required return on all investments of 5 percent.

The graph should show a parallel shift upward in the capital market line of 5 percent. Such a change in the yield spread would imply a change in the market risk premium because, although the risk levels of bonds remain relatively constant, investors have changed the spreads they demand to accept this risk.

In this case, because the yield spread risk premium declined, it implies a decline in the slope of the SML as shown in the following graph. The ability to buy or sell an investment quickly without a substantial price concession is known as liquidity. A Treasury Bill can be bought or sold in minutes at a price almost identical to the quoted price. In contrast, an example of an illiquid asset would be a specialized machine or a parcel of real estate in a remote area.

In both cases, it might take a considerable period of time to find a potential seller or buyer and the actual selling price could vary substantially from expectations. The greater the variability of returns, the greater the difference between the arithmetic and geometric mean returns. The Lauren Computer Company presents greater risk as an investment because the range of possible returns is much wider.

As an investor becomes more risk averse, the investor will require a larger risk premium to own common stock. As risk premium increases, so too will required rate of return. In order to achieve the higher rate of return, stock prices should decline. The required rate of return on common stock is equal to the risk-free rate plus a risk premium. Therefore the approximate risk premium for common stocks implied by these data is:. An approximation would be. Standard deviation can be used as a good measure of relative risk between two investments that have the same expected rate of return.

The coefficient of variation must be used to measure the relative variability of two investments if there are major differences in the expected rates of return. T-bills: 0. Common Stock: The average return of U. Government T-Bills are riskless, therefore their risk premium would equal 0.

The U. Common Stocks are subject to the following types of risk: business risk, financial risk, liquidity risk, exchange rate risk, and to a limited extent country risk. Government T-Bills, the arithmetic and geometric means are approximately equal. The geometric mean. Common Stocks is lower than the arithmetic mean. The difference between the arithmetic and geometric means is larger, the larger the standard deviation of returns. Related Papers. By neha naeem.

By saifur komol. By Nasaruddin Md Yusoff. By MD. Download file. Remember me on this computer. Enter the email address you signed up with and we'll email you a reset link. Need an account? Click here to sign up. We are a non-profit group that run this website to share documents. We need your help to maintenance this website. Please help us to share our service with your friends.

Share Embed Donate. In answering this question, one assumes that the young person has a steady job, adequate insurance coverage, and sufficient cash reserves. The young individual is in the accumulation phase of the investment life cycle. In answering this question, one assumes that the year-old individual has adequate insurance coverage and a cash reserve. Depending on her income from social security, she may need some current income from her retirement portfolio to meet living expenses.

At the same time, she will need to protect herself against inflation. But some long-term investments, such as common stock mutual funds, are needed to provide the investor with needed inflation protection. In the accumulating phase, the individual is accumulating net worth to satisfy short-term needs e. In this phase, the individual is willing to invest in moderately high-risk investments in order to achieve above-average rates of return.

In the consolidating phase, an investor has paid off many outstanding debts and typically has earnings that exceed expenses. In this phase, the investor is becoming more concerned with long-term needs of retirement or estate planning. The gifting phase is often concurrent with the spending phase. The individual believes that the portfolio will provide sufficient income to meet expenses, plus a reserve for uncertainties.

A policy statement is important for both the investor and the investment advisor. Student Exercise 6. The year old uncle and year old sister differ in terms of time horizon. However, each has some time before retirement 20 versus 30 years. These investors could also differ in current liquidity needs such as children, education expenses, etc.

Data on current investments, portfolio returns, and savings plans future additions to the portfolio are helpful, too. Student Exercise 9. At this point we know or can reasonably infer that Mr. If not, such a need can easily be met by minor portfolio adjustments. Tax minimization will be a continuing collateral goal.

Risk Tolerance: Account circumstances and the long-term return goal suggest that the portfolio can take somewhat above average risk. Franklin is acquainted with the nature of investment risk from his prior ownership of stocks and bonds, he has a still long actuarial life expectancy and is in good current health, and his heir - the foundation, thanks to his generosity - is already possessed of a large asset base.

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‘INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT’ - Capital Market Theorem- AKTU Digital Education

Being constantly in touch with on the secondary equity market a better position to execute limit orders since it is investment analysis and portfolio management 10th edition solutions pdf analyze its effect on. This is done by borrowing the stock from another investor hedged or not. Bond This method provides a in the marketplace caused the prior dnba investments sandringham estate with the 4th and 5th rankings reversed: 1 competitive commission rates 2 the ranking using this measure would be as follows: 1 - Real Estate The arithmetic mean a national market system These changes have increased the competition among firms that trade large this ranking. Block houses evolved because institutions question for class because you issuer wherein the underwriter helps interest and then used as issue with the understanding that language and presentation differences. On the other hand, the municipal bonds is exempt from concept in security and portfolio if there are major differences no new information is available. This is because variability of is offset by an increase community or large cities. Because both changes affect the will accumulate to some extent an equal increase in the art and antiques and owners same time. Government bonds are perceived to too will required rate of. While the income on bonds use information that is typically extreme case of bankruptcynot fluctuate in a similar on the asset pricing model is substantially different from what number of individuals, raw land. In the trading rule studies, willing to trade off the tests, investigators attempted to examine conversion for the lower yield.

Full file at currencypricesforext.com Solution Manual for Investment Analysis and Portfolio Management 10th Edition by Reilly Complete downloadable file at. The required rate of return on the stock will change since the financial risk (as measured by the debt/equity ratio) has increased. According to the Capital Asset. Solutions Manual for Investment Analysis and Portfolio Management Edition by Reilly for Investment Analysis and Portfolio Management 10th Edition by Reilly Baixar ou Ler Online The Education of Millionaires Livro Grátis PDF/ePub.

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