Chapter 6 Bonds (7)

Interpretation
Why study bond markets?
Bond Ratings
Historical Yield of Corporate Bonds
U.S. Treasury Securities
Bond Valuation
Yield to Maturity
Zero-Coupon Bonds (Pure Discount Bonds)
Zero-Coupon Yield Curve
Key Points
The Bondholder expected rate of return (YTM)
Bond Prices & Interest Rates
Time and Bond Prices
Interest Rate Risk and Bond Prices
Maturity, PV and Interest Rate Change
The Term Structure of Interest Rates
Yield Curves
Bond Price at the Payout Date

Chapter 7 Stock Valuation (6)

Stock Basics
Features of Preferred Stock
Market vs. Limit Order
Stock Price
Dividend Yields, Capital Gains and Total Returns
When to buy a Stock?
Common Stock Valuation: Constant Dividend Growth Model
Expected Return on Common Stock
Application: The Subprime Financial Crisis and the Stock Market
Estimating the growth rate
Unprofitable Growth
Share repurchases and the total payout model
How would an investor decide whether to buy or sell a stock?

Chapter 10 Stock Valuation: a second look (5)

The Discounted Free Cash Flow Model
Income Statement
Discounted Free Cash Flow Model
Variation Based on Comparable Firms
Price-Earnings Ratio
Trailing P/E vs. Forward P/E
P/E and Dividend Discount Model
Enterprise Value Multiples
Limitations of Multiples
Stock Valuation Techniques: The Final Word
Information, Competition and Stock Prices
Three Forms of Efficiency by Information Type

Chapter 11 - Risk and Return in Capital Markets (8)

Realized Return
Annual Realized Return
Average Annual Return of a Security (Arithmetic Return)
Interpretation: Arithmetic vs. Geometric Returns

Risk and return in stock market

Use of Average Return
Historical Risks and Returns of Stocks
Normal Distribution
Systematic vs. Unsystematic Risk
Common vs. Independent Risk
Total Risk, Systematic Risk and Unsystematic Risk
Risk Premium & Systematic Risk

Chapter 12 Systematic Risk and Equity Risk Premium (9)

Review of chapter 11
Return on a Portfolio
The Volatility of a Portfolio
Historical Risk and Returns of Portfolio
Measuring Stocks Co-movement: Correlation
Computing a Portfolios Variance and Standard Deviation
Computing a Volatility of Two-Stock Portfolio
Volatility of an Equally Weighted Portfolio vs.# of stocks
The Market Portfolio
Stock Market Indexes as the Market Portfolio
Systematic Risk and Asset Return
Interpretation of Beta
Measuring Systematic Risk in Practice
Security Market Line
Total Risk vs. Systematic Risk

Chapter 13 Cost of Capital (10)

Why cost of capital important?
Required return
Source of capital
Cost of common stock
Estimating the cost of equity
Cost of Preferred Stock
Cost of Debt
Weight Average Cost of Capital
Calculating the weights in the WACC
Using WACC to value a project
Project-based cost of capital
When Raising External Capital is costly
Methods in Practice
Extended Example WACC

Extra
MFL Study Plan (Done without Looking >10x)
Critical Questions (End of Chapter)
PRS Questions & Quiz Questions
Self Study Questions
Another Summary (The Traps, The Steps)