INVESTMENTS投资学（博迪BODIEKANEMARCUS）Chap002AssetClassesandFinancialInstruments

,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,INVESTMENTS,|,BODIE,KANE,MARCUS,2-,*,CHAPTER 2,Asset Classes and Financial Instruments,Asset Classes,Money market instruments,Capital market instruments,Bonds,Equity Securities,Derivative Securities,2,The Money Market,Subsector of the fixed-income market:Securities are short-term,liquid,low risk,and often have large denominations,Money market mutual funds allow individuals to access the money market.,3,Table 2.1 Major Components ofthe Money Market,4,Money Market Securities,Treasury bills:Short-term debt of U.S.government,Bid and asked price,Bank discount method,Certificates of Deposit:Time deposit with a bank,Commercial Paper:Short-term,unsecured debt of a company,5,Money Market Securities,Bankers Acceptances:An order to a bank by a banks customer to pay a sum of money on a future date,Eurodollars:dollar-denominated time deposits in banks outside the U.S.,Repos and Reverses:Short-term loan backed by government securities.,Fed Funds:Very short-term loans between banks,6,Yields on Money Market Instruments,Except for Treasury bills,money market securities are not free of default risk,Both the premium on bank CDs and the TED spread have often become greater during periods of financial crisis,During the credit crisis of 2008,the federal government offered insurance to money market mutual funds after some funds experienced losses,7,The Bond Market,Treasury Notes and Bonds,Inflation-Protected Treasury Bonds,Federal Agency Debt,International Bonds,8,The Bond Market,Municipal Bonds,Corporate Bonds,Mortgages and Mortgage-Backed Securities,9,Treasury Notes and Bonds,Maturities,Notes maturities up to 10 years,Bonds maturities from 10 to 30 years,Par Value-$1,000,Interest paid semiannually,Quotes percentage of par,10,The Bond Market,Inflation-Protected Treasury Bonds,TIPS:Provide inflation protection,Federal Agency Debt,Debt of mortgage-related agencies such as Fannie Mae and Freddie Mac,International Bonds,Eurobonds and Yankee bonds,11,Municipal Bonds,Issued by state and local governments,Interest is exempt from federal income tax and sometimes from state and local tax,12,Municipal Bonds,Types,General obligation bonds:Backed by taxing power of issuer,Revenue bonds:backed by projects revenues or by the municipal agency operating the project.,13,Figure 2.4 Tax-exempt Debt Outstanding,14,Municipal Bond Yields,To choose between taxable and tax-exempt bonds,compare after-tax returns on each bond.,Let,t,equal the investors marginal tax bracket,Let,r,equal the before-tax return on the taxable bond and,r,m,denote the municipal bond rate.,If,r(1-t)r,m,then the taxable bond gives a higher return;otherwise,the municipal bond is preferred.,15,Table 2.2 Tax-Exempt Yield Table,The equivalent taxable yield is simply the tax-free rate,r,m,divided by,(1-t,),.,16,Corporate Bonds,Issued by private firms,Semi-annual interest payments,Subject to larger default risk than government securities,Options in corporate bonds,Callable,Convertible,17,Proportional ownership of a mortgage pool or a specified obligation secured by a pool,Produced by securitizing mortgages,Mortgage-backed securities are called,pass-,throughs,because the cash flows produced by homeowners paying off their mortgages are passed through to investors.,Mortgage-Backed Securities,18,Mortgage-Backed Securities,Most mortgage-backed securities were issued by Fannie Mae and Freddie Mac.,Traditionally,pass-,throughs,were comprised of conforming mortgages,which met standards of credit worthiness.,19,Mortgage-Backed Securities,Eventually,“Private-label”issuers securitized large amounts of subprime mortgages,made to financially weak borrowers.,Finally,Fannie and Freddie were allowed and even encouraged to buy subprime mortgage pools.,September,2008:Fannie and Freddie got taken over by the federal government.,20,Figure 2.6 Mortgage-backed securities outstanding,21,Equity Securities,Common stock:Ownership,Residual claim,Limited liability,Preferred stock:Perpetuity,Fixed dividends,Priority over common,Tax treatment,American Depository Receipts,22,Stock Market Indexes,Dow Jones Industrial Average,Includes 30 large blue-chip corporations,Computed since 1896,Price-weighted average,23,Example 2.2 Price-Weighted Average,Portfolio:Initial value$25+$100=$125,Final value$30+$90=$120,Percentage change in portfolio value,=5/125=-.04=-4%,Index:Initial index value (25+100)/2=62.5,Final index value (30+90)/2=60,Percentage change in index-2.5/62.5,=-.04=-4%,24,S&P 500,Broadly based index of 500 firms,Market-value-weighted index,Investors can base their portfolios on an index:,Buy an index mutual fund,Buy exchange traded funds(,ETFs,),Standard&Poors Indexes,25,Other Indexes,U.S.Indexes,NYSE Composite,NASDAQ Composite,Wilshire 5000,Foreign Indexes,Nikkei(Japan),FTSE(U.K.;pronounced“,footsie,”),DAX(Germany),Hang,Seng,(Hong Kong),TSX(Canada),26,Derivatives Markets,Options and futures provid