CONTENTS
PREFACE = xiii
1 THE INVESTMENT ENVIRONMENT = 1
Investment, Speculation, and Gambling = 3
The Investment Process = 4
Investment Alternatives = 7
Capital Markets = 10
Sources of Savings = 11
Investment Risk = 14
Systematic Risks = 18
Unsystematic Risks = 21
Key Terms = 23
Questions = 23
Selected Readings = 24
2 THE INDIVIDUAL'S INVESTMENT PERSPECTIVE = 25
Time Value of Money = 25
Interest Calculations = 26
Individual Investors = 31
Investor Characteristics = 31
Individual Investor Constraints and Attitudes = 33
Personal Objectives of Investment Management = 36
Financial Objectives of Investment Management = 39
Key Terms = 43
Questions = 43
Selected Readings = 44
3 FIXED-RETURN INVESTMENTS = 46
Savings Alternatives = 46
Federal Savings Instruments = 47
Fixed-Return Government Securities = 49
Features of Corporate Bonds = 55
Types of Corporate Bonds = 64
Preferred Stock = 68
Commercial Paper = 70
Key Terms = 71
Questions = 71
Selected Readings = 72
4 FIXED-RETURN SECURITY ANALYSIS = 73
Basic Principles of Bond Price Behavior = 74
Term Structure of Interest Rates = 75
Yield Calculations = 78
Accrued Interest on Bonds = 82
Government Securities = 82
Corporate Bond Analysis = 86
Preferred Stock Analysis = 93
Key Terms = 102
Questions = 102
Selected Readings = 103
5 VARIABLE-RETURN INVESTMENTS = 104
Corporate Form of Ownership = 105
Ownership Risk of Common Stock = 108
Common Stock = 109
Subscription Rights = 114
Stock-Purchase Warrants = 115
Historical Rate of Return = 120
Types of Common Stock Investments = 121
Real Estate Investment = 122
Foreign Investments = 123
Key Terms = 125
Questions = 125
Selected Readings = 125
6 VARIABLE-RETURN SECURITY ANALYSIS = 127
Interpretation of Financial Data = 136
Valuation of Common Stock = 141
Evaluating the Company = 147
Key Terms = 159
Questions = 159
Selected Readings = 160
7 OPTIONS AND FUTURES = 161
Stock Options = 162
Preemptive Stock Rights = 170
Stock Purchase Warrants = 172
Convertible Bonds = 175
The Futures Market = 179
Key Terms = 185
Questions = 185
Selected Readings = 186
8 THE SECURITIES MARKETS = 188
Primary Market = 188
Secondary Markets = 199
Key Terms = 217
Questions = 218
Selected Readings = 218
9 THE BROKERAGE BUSINESS = 220
Types of Brokerage Firms = 220
Brokerage Information = 222
Selecting a Brokerage Firm and a Broker = 223
Opening a Brokerage Account = 224
Types of Orders = 227
Time Period for Orders = 229
Odd-Lot Orders = 230
Execution of Orders = 231
Short Sales = 233
Margin Trading = 234
Bond Trading = 237
Delivery and Settlement = 238
Fees and Commissions = 238
Future of the Brokerage Business = 240
Key Terms = 241
Questions = 241
Selected Readings = 242
10 INVESTMENT COMPANIES = 243
Historical Background = 243
Growth of the Mutual Fund Industry = 245
Classification of Investment Companies = 248
Portfolio Classification of Funds = 249
Mutual Fund Accounts = 253
Mutual Fund Expenses = 254
Dividend and Capital Gains = 258
Selection and Performance of Mutual Funds = 259
Measuring Performance = 262
Securing Information = 263
Key Terms = 264
Questions = 270
Selected Readings = 270
11 SECURITIES REGULATION = 272
Securities and Exchange Commission = 273
Securities Act of 1933 = 274
Securities Act Amendments of 1964 = 277
Securities Exchange Act of 1934 = 277
Public Utility Hilding Company Act of 1935 = 280
Trust Indenture Act of 1939 = 280
Investment Company Act of 1940 = 281
Investment Company Amendments Act of 1970 = 281
National Association of Securities Dealers = 282
Securities Investor Protection Act of 1970 = 283
Investment Advisers Act of 1940 = 283
Bankruptcy Act, Chapter 10 = 284
Regulation by the Brokers = 284
State Blue-Sky Laws = 285
Regulations by the Exchanges = 286
Financial Reporting Requirements = 287
Key Terms = 288
Questions = 288
Selected Readings = 289
12 ECONOMIC AND INDUSTRY ANALYSIS = 290
Classification of Information = 291
Economic Environment = 305
Industry-Wide Projections and Evaluations = 315
Key Terms = 335
Questions = 335
Selected Readings = 336
13 MARKET ANALYSIS AND TIMING = 337
Market Analysis = 338
Analysis of Market Price = 352
Approaches to Investment Timing = 357
Disagreement with Technical Analysis = 362
Key Terms = 365
Questions = 365
Selected Readings = 366
14 TRADITIONAL SECURITY PORTFOLIO MANAGEMENT = 368
Traditional Steps in Portfolio Management = 370
Types of Investors = 370
Types of Securities = 372
Monitoring the Portfolio = 373
Key Terms = 379
Questions = 379
Selected Readings = 379
15 MODERN PORTFOLIO THEORY = 380
Markowitz's Contribution = 381
Risk and Return on the Portfolio = 383
Capital Market Line = 388
Fate of Modern Portfolio Theory = 393
Key Terms = 395
Questions = 395
Selected Readings = 395
16 REAL ESTATE INVESTMENTS = 397
Major Areas of Real Estate Investment = 398
Advantages of Real Estate Investment = 398
Disadvantages of Real Estate Investment = 399
Residential Property: The Buy or Rent Decision = 399
Indirect ownership of Real Estate = 401
Financial Analysis and Funding of Real Estate Investment Projects = 404
Taxation of Real Estate Investments = 417
Key Terms = 419
Questions = 420
Selected Readings = 420
17 TAXATION AND ESTATE PLANNING = 422
Income Taxes = 422
Estate Planning = 428
Retirement Planning = 436
Key Terms = 438
Questions = 438
Selected Readings = 439
GLOSSARY = 451
INDEX = 463
