投资学

IInvestmentWhen people give up the immediate possession of the savings for a future larger amount of money that will be available for future consumption. What they do with the savings to make them increase over time is investment.Risk PremiumMost investors require higher rates of return on investments if they perceive that there is any uncertainty about the expected rate of return. This increase in the required rate of return over the NRFR is the risk premium.Efficient Market HypothesisThe concept that there are many participants in the securities markets who are profit maxizing and alert to information so that there are almost instant adjustment to new information.The Beta CoefficientBeta can be viewed as a standardized measure of systematic risk. Specially, we already know that the covariance of any asset i with the market portfolio (iM Cov ) is the relevant risk measure. Beta is a standardized measure of risk because it relates this covariance to the variance of the market portfolio.2iMi MCov βσ=Holding Period ReturnThe period during which you own an investment is called its holding period, and the return for that period is the holding period return.IIA: What is the Arbitrage Pricing Theory (APT)? What are the similarities and differences relative to the Capital Asset Pricing Model (CAPM)?Arbitrage Pricing Theory (APT) is an equilibrium asset pricing theory derived from a factor model by using diversification and arbitrage, The APT shows that the expected return on any risky asset is a linear combination of various factors. That is, the APT asserts that an asset`s riskiness and, hence, its average long-term return, is directly related to its sensitivities to certain factors. Thus, the APT is a multi-factor model which allows for as many factors as are important in the pricing of assets.CAPM APT Form of Equation Linear LinearNumber of Risk Factors 1()1K ≥Factor Risk Premium()m E R RFR -⎡⎤⎣⎦{}jλFactor Risk Sensitivityiβ{}ij b‘Zero-Beta’ Return RFR0λB: What are the four step in the portfolio management process?1.Policy statement. Focus: Investor`s short-term and long-term needs, familiarity with capitalmarket history, and expectations.2.Examine current and projected financial, economic, political, and social conditions. Focus:Short-term and intermediate-term expected conditions to see in constructing a specific portfolio.3.Implement the plan by constructing the portfolio. Focus: Meet the investor`s needs atminimum risk levels.4.Feedback Loop: Monitor and update investor needs, environmental conditions, evaluateportfolio performance.What is the original DuPont System and how does a firm improve its return on equality in general?1.Original DuPont System:Net income Net income Net SalesROE Common Equlity Net Sales Common Equlity ==⨯2.When there are three factors, extended DuPont System.ROE = Profit Margin⨯Total Asset Turnover⨯Leverage Financial. In order to improve itsProfit Margin, which equals to Net incomeNet Sales, as well as improve its Total Asset.Turnover, which equals to Net salesTotal Turnover, however, when improving financialleverage, which equals to Total AssetsCommon Equlity, a firm must be cautions sincethe improvement of financial leverage can be a two-side sword.III1.Consider the following data for two risk factors (1 and 2) and two securities (J and L):00.05λ=10.80Jb=10.02λ=21.40Jb=20.04λ=11.60Lb=22.25Lb=pare the expected returns for both securities.b.Suppose that Security J is currently priced at $22.50 while the price of Security L is$15.00. Further, it is expected that both securities will pay a dividend of $0.75 during the coming year. What is the expected price of each security one year from now?According to APT, we have ()01122q q q E R b b λλλ=++, and we have known that:01212120.05,0.02,0.040.80, 1.40, 1.60, 2.25J J L L b b b b λλλ===⎧⎨====⎩ Therefore: (a)()0.050.020.800.04 1.4012.20%j E R =+⨯+⨯=()0.050.02 1.600.04 2.2517.20%L E R =+⨯+⨯=(b)Total Return = Dividend + Capital Gain YieldFor Security J, the dividend yield is $0.753.3%$22.25= For Security L, the dividend yield is $0.755.0%$15.00=Hence, the expected price for security is: $22.50(10.0887)$25.50⨯+=$22.50(10.1220)$16.83⨯+=2. The following are the monthly rates of return for Madison Software Corp, and forKayleigh Electric during a six-month period.Month Madison SoftwareKayleigh Electric1 -0.04 0.072 0.06 -0.023 -0.07 -0.104 0.12 0.15 5 -0.02 -0.06 60.050.02Compute the following:a. Expected monthly rate of return ()i E R ⎡⎤⎣⎦for each stockb. Standard deviation of returns for each stockc. The covariance between the rates of returnd. The correlation coefficient between the rates of returnWhat level of correlation did you expect? How did you expectations compare with the computed correlation? Would these two stock offer a good chance for diversification? Why or not?For Madison Software:()()110.040.060.070.120.020.050.01676i i E R R n==-+-+-+=∑ ()R σ=()()220.070.01670.120.0167+--+-()()220.020.01670.050.0167]+--+-0.06549=For Kayleigh Electric:()()110.070.020.100.150.060.020.016i i E R R n==--+-+=∑()0.08287R σ== ()1cov ,0.02220.00376i j =⨯=()()cov ,0.682,ij iji j σσσ==3. The preferred stock of the Clarence Radiology Company has a par value of $100 and a$9 dividend rate. Y ou require an 11 percent rate of return on this stock. What is the maximum price you would pay for it? Would you buy it at a market price of $96?$9.00$81.82Re Re 11%DividendMaximum price quired Rate of turn===Because $81.82$96≤, I won`t buy it.一、名词解释1. Investmen t: an investment is the current commitment of dollars for a period of time in order to derive future payments that will compensate the investor for the time involved, the expected rate of inflation and the uncertainty of the future payments.2. Risk : is the uncertainty that an investment will earn its expected rate of return.3.Market : a market is the means through which buyers and sellers are brought together to aid in the transfer of goods and services.4. Short position : the seller of a commodity or security or for a forward contract, the eventual seller of the underlying asset.5. Long position : the buyer of a commodity or security or for a forward contract, the eventual seller of the underlying asset.6. Portfolio ：A group of investment, ideally, the investments should have different patterns of returns over time.7. Covariance of rates of returns : covariance is a measure of the degree to whichtwo variables move together relative to their individual means.8. NPV : A measure of the excess cash flows expected from an investment proposal.It is equal to the present value of cash inflows from an investment proposal discounted at the required rate of return for the investment minus the present value of the cash outflows required by the investment also discounted at the investment ’s required rate of return. If the derived net present value is positive ( ie.there is an excess net present value),the investment should be acquired since it will provide a rate of return above the required returns.二、简答1. Compare CAPM and APT:The capital asset pricing model (CAPM) extends capital market theory in a way that allows investors to evaluate the risk-return trade-off for both diversified portfolios and individual securities. To make this extension , the CAPM redefines the relevant measure of risk as beta, which is the systematic component of a security ’s volatility relative to that market portfolio.CAPM: E (R i )=RFR+βi ( E(R M )-RFR)Or =RFR+σi γi m / σm * (E (R M )-RFR )Arbitrage Pricing Theory (APT) is an equilibrium asset pricing theory derived from a factor model by using diversification and arbitrage, The APT shows that the expected return on any risky asset is a linear combination of various factors. That is, the APT asserts that an asset`s riskiness and, hence, its average long-term return, is directly related to its sensitivities to certain factors. Thus, the APT is a multi-factor model which allows for as many factors as are important in the pricing of assets. APT: E (R i )=λ0+λ1b i 1+λ2b i 2+…+λk b i kCAPM APT Form of Equation Linear LinearNumber of Risk Factors 1()1K ≥Factor Risk Premium ()m E R RFR -⎡⎤⎣⎦{}jλFactor Risk Sensitivity i β{}ijb‘Zero -Beta’ ReturnRFR0λ2.CAPM and APT 假设条件的不同：The following major assumptions-which were used in the development of the CAPM–are not required in APT: (1) Investors possess quadratic utility functions,（2）normally distributed security returns, and （3）a market portfolio that contains all risky assets and is mean-variance efficient.3.杜邦The Dupont systemThe return on owner’s equity (ROE) ratio is extremely important to the owner of the enterprise (the common stockholder) because it indicates the rate of return that management has earned on the capital provided by the owner after accounting for payments to all other capital suppliers.The importance of ROE as an indicator of performance makes it desirable to divide the ratio into several components that provide insights into the causes of a firm’s ROE or any changes in it.This breakdown of ROE into component ratios is generally referred to as the DuPont system.EBIT/Total Assets - Interest Expense/Total Assets = Net Before Tax(NBT)/Total AssetsP223 例题44、Analysis of Growth PotentialThe analysis of sustainable growth potential examines ratios that indicate how fast a firm should grow.The growth of equity earnings is a function of two variables: (1) the percentage of net earnings retained and reinvested into the business (the firm’s retention rate) and (2) the rate of return earned on the firm’s equity capital (the firm’s ROE)g = Percentage of Earnings Retained ×Return on Equity= RR ×ROEg = potential (i.e., sustainable) growth rateRR = the retention rate of earningsROE = the firm’s return on equity5、复利求现值。