Professional Documents
Culture Documents
Background
and Issues
1
Bodie, Kane and Marcus
Essentials of Investments
9th Global Edition
McGraw-Hill/Irwin
future consumption
Real Assets
Used to produce goods and services: Property,
Financial Assets
Claims on real assets or claims on real-asset
income
assets
etc.
Bonds
Preferred stock
Derivative securities
condition
Management
Mitigating Factors
Performance-based compensation
Boards of directors may fire managers
Threat of takeovers
Ethics
operate efficiently
required
Ethics
Sarbanes-Oxley Act:
Requires more independent directors on company
boards
statements
industry
ethical standards
Alternative assets 6%
Average
Average Annual
Annual Return
Return Minimum
Minimum (1931)
(1998) Maximum
Maximum (1933)
(2003)
Stocks
Stocks
About
About 12%
12.8%
46%
40%
55%
102%
average
Bonds
Risk-Return Trade-Off
How do we measure risk?
How does diversification affect risk?
savers)
transactions
Primary market
Newly issued securities offered to public
Investment banker typically underwrites issue
Secondary market
Pre-existing securities traded among investors
stock exchange