BOOK
Fundamentals of Investing, Global Edition
Scott B. Smart | Lawrence J. Gitman | Michael D. Joehnk
(2016)
Additional Information
Book Details
Abstract
For undergraduate courses in Investments.
The Core Concepts and Tools Students Need to Make Informed Investment Decisions
Fundamentals of Investing helps students make informed investment decisions by providing a solid foundation of core concepts and tools. Smart/Gitman/Joehnk use practical, hands-on applications to introduce the topics and techniques used by both personal investors and money managers. The authors integrate a consistent framework based on learning goals to keep students focused in each chapter. Students leave the course with the necessary information for developing, implementing, and monitoring a successful investment program.
The Thirteenth Edition uses a conversational tone to make the foreign language, concepts, and strategies of investing accessible to a student audience. With the help of examples throughout, students learn to make informed decisions in order to achieve investment goals. The book focuses on both individual securities and portfolios, teaching students to consider the risk and return of different types of investments and how to use this knowledge to develop, implement, and monitor goals.
MyFinanceLab™ not included. Students, if MyFinanceLab is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN and course ID. MyFinanceLab should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information.
MyFinanceLab is an online homework, tutorial, and assessment product designed to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Title Page | 3 | ||
| Copyright Page | 4 | ||
| Brief Contents | 7 | ||
| Contents | 8 | ||
| Preface | 17 | ||
| Acknowledgments | 27 | ||
| Chapter 1: The Investment Environment | 31 | ||
| Opening Vignette | 31 | ||
| Investments and the Investment Process | 32 | ||
| Attributes of Investments | 32 | ||
| The Structure of the Investment Process | 35 | ||
| Types of Investments | 37 | ||
| Short-Term Investments | 37 | ||
| Common Stock | 38 | ||
| Fixed-Income Securities | 39 | ||
| Mutual Funds | 40 | ||
| Exchange-Traded Funds | 41 | ||
| Hedge Funds | 42 | ||
| Derivative Securities | 42 | ||
| Other Popular Investments | 43 | ||
| Making Your Investment Plan | 44 | ||
| Writing an Investment Policy Statement | 44 | ||
| Considering Personal Taxes | 46 | ||
| Investing over the Life Cycle | 49 | ||
| Investing over the Business Cycle | 50 | ||
| Meeting Liquidity Needs with Short-Term Investments | 52 | ||
| The Role of Short-Term Investments | 52 | ||
| Common Short-Term Investments | 53 | ||
| Investment Suitability | 53 | ||
| Careers in Finance | 57 | ||
| Summary | 60 | ||
| Discussion Questions | 62 | ||
| Problems | 63 | ||
| Case Problem 1.1 | 64 | ||
| Case Problem 1.2 | 65 | ||
| Excel@Investing | 66 | ||
| Chapter 2: Securities Markets and Transactions | 67 | ||
| Opening Vignette | 67 | ||
| Securities Markets | 68 | ||
| Types of Securities Markets | 68 | ||
| Broker Markets and Dealer Markets | 74 | ||
| Alternative Trading Systems | 78 | ||
| General Market Conditions: Bull or Bear | 78 | ||
| Globalization of Securities Markets | 79 | ||
| Growing Importance of International Markets | 80 | ||
| International Investment Performance | 80 | ||
| Ways to Invest in Foreign Securities | 81 | ||
| Risks of Investing Internationally | 81 | ||
| Trading Hours and Regulation of Securities Markets | 83 | ||
| Trading Hours of Securities Markets | 83 | ||
| Regulation of Securities Markets | 83 | ||
| Basic Types of Securities Transactions | 85 | ||
| Long Purchase | 85 | ||
| Margin Trading | 86 | ||
| Short Selling | 92 | ||
| Summary | 95 | ||
| Discussion Questions | 98 | ||
| Problems | 98 | ||
| Case Problem 2.1 | 101 | ||
| Case Problem 2.2 | 102 | ||
| Excel@Investing | 102 | ||
| Chapter 3: Investment Information and Securities Transactions | 104 | ||
| Opening Vignette | 104 | ||
| Investment Research and Planning | 105 | ||
| Getting Started in Investment Research | 105 | ||
| Pros and Cons of the Internet as an Investment Tool | 109 | ||
| Types and Sources of Investment Information | 110 | ||
| Types of Information | 112 | ||
| Sources of Information | 112 | ||
| Understanding Market Averages and Indexes | 124 | ||
| Stock Market Averages and Indexes | 124 | ||
| Bond Market Indicators | 128 | ||
| Making Securities Transactions | 130 | ||
| The Role of Stockbrokers | 130 | ||
| Basic Types of Orders | 134 | ||
| Online Transactions | 136 | ||
| Transaction Costs | 138 | ||
| Investor Protection: SIPC and Arbitration | 138 | ||
| Investment Advisors and Investment Clubs | 140 | ||
| Using an Investment Advisor | 140 | ||
| Investment Clubs | 141 | ||
| Summary | 142 | ||
| Discussion Questions | 145 | ||
| Problems | 146 | ||
| Case Problem 3.1 | 148 | ||
| Case Problem 3.2 | 149 | ||
| Excel@Investing | 150 | ||
| Chapter 4: Return and Risk | 151 | ||
| Opening Vignette | 151 | ||
| The Concept of Return | 152 | ||
| Components of Return | 152 | ||
| Why Return Is Important | 153 | ||
| Level of Return | 154 | ||
| Historical Returns | 156 | ||
| The Time Value of Money and Returns | 156 | ||
| Measuring Return | 158 | ||
| Real, Risk-Free, and Required Returns | 159 | ||
| Holding Period Return | 161 | ||
| The Internal Rate of Return | 163 | ||
| Finding Growth Rates | 167 | ||
| Risk: The Other Side of the Coin | 168 | ||
| Sources of Risk | 168 | ||
| Risk of a Single Asset | 171 | ||
| Assessing Risk | 174 | ||
| Steps in the Decision Process: Combining Return and Risk | 176 | ||
| Summary | 177 | ||
| Discussion Questions | 179 | ||
| Problems | 179 | ||
| Case Problem 4.1 | 183 | ||
| Case Problem 4.2 | 184 | ||
| Excel@Investing | 185 | ||
| Chapter-Opening Problem | 186 | ||
| Appendix 4A: The Time Value of Money | 187 | ||
| Opening Vignette | 187 | ||
| Interest: The Basic Return to Savers | 187 | ||
| Simple Interest | 187 | ||
| Compound Interest | 187 | ||
| Computational Aids for Use in Time Value Calculations | 189 | ||
| Financial Calculators | 189 | ||
| Computers and Spreadsheets | 190 | ||
| Future Value: An Extension of Compounding | 190 | ||
| Future Value of an Annuity | 192 | ||
| Present Value: An Extension of Future Value | 192 | ||
| Present Value of a Stream of Returns | 193 | ||
| Present Value of a Mixed Stream | 194 | ||
| Present Value of an Annuity | 195 | ||
| Summary | 196 | ||
| Problems | 196 | ||
| Chapter 5: Modern Portfolio Concepts | 200 | ||
| Opening Vignette | 200 | ||
| Principles of Portfolio Planning | 201 | ||
| Portfolio Objectives | 201 | ||
| Portfolio Return and Standard Deviation | 201 | ||
| Correlation and Diversification | 204 | ||
| International Diversification | 210 | ||
| The Capital Asset Pricing Model | 212 | ||
| Components of Risk | 212 | ||
| Beta: A Measure of Undiversifiable Risk | 213 | ||
| The CAPM: Using Beta to Estimate Return | 217 | ||
| Traditional Versus Modern Portfolio Management | 220 | ||
| The Traditional Approach | 220 | ||
| Modern Portfolio Theory | 221 | ||
| Reconciling the Traditional Approach and MPT | 226 | ||
| Summary | 227 | ||
| Discussion Questions | 229 | ||
| Problems | 230 | ||
| Case Problem 5.1 | 237 | ||
| Case Problem 5.2 | 239 | ||
| Excel@Investing | 240 | ||
| Chapter-Opening Problem | 241 | ||
| CFA Exam Questions | 243 | ||
| Chapter 6: Common Stocks | 245 | ||
| Opening Vignette | 245 | ||
| What Stocks Have to Offer | 246 | ||
| The Appeal of Common Stocks | 246 | ||
| Putting Stock Price Behavior in Perspective | 246 | ||
| From Stock Prices to Stock Returns | 246 | ||
| A Real Estate Bubble Goes Bust and So Does the Market | 248 | ||
| The Pros and Cons of Stock Ownership | 249 | ||
| Basic Characteristics of Common Stock | 251 | ||
| Common Stock as a Corporate Security | 251 | ||
| Buying and Selling Stocks | 255 | ||
| Common Stock Values | 256 | ||
| Common Stock Dividends | 258 | ||
| The Dividend Decision | 259 | ||
| Types of Dividends | 260 | ||
| Dividend Reinvestment Plans | 262 | ||
| Types and Uses of Common Stock | 264 | ||
| Types of Stocks | 264 | ||
| Investing in Foreign Stocks | 268 | ||
| Alternative Investment Strategies | 272 | ||
| Summary | 275 | ||
| Discussion Questions | 277 | ||
| Problems | 278 | ||
| Case Problem 6.1 | 281 | ||
| Case Problem 6.2 | 282 | ||
| Excel@Investing | 283 | ||
| Chapter 7: Analyzing Common Stocks | 284 | ||
| Opening Vignette | 284 | ||
| Security Analysis | 285 | ||
| Principles of Security Analysis | 285 | ||
| Who Needs Security Analysis in an Efficient Market? | 286 | ||
| Economic Analysis | 288 | ||
| Economic Analysis and the Business Cycle | 289 | ||
| Key Economic Factors | 289 | ||
| Developing an Economic Outlook | 290 | ||
| Industry Analysis | 293 | ||
| Key Issues | 293 | ||
| Developing an Industry Outlook | 295 | ||
| Fundamental Analysis | 296 | ||
| The Concept | 296 | ||
| Financial Statements | 297 | ||
| Financial Ratios | 300 | ||
| Interpreting the Numbers | 313 | ||
| Summary | 317 | ||
| Discussion Questions | 318 | ||
| Problems | 318 | ||
| Case Problem 7.1 | 322 | ||
| Case Problem 7.2 | 324 | ||
| Excel@Investing | 325 | ||
| Chapter-Opening Problem | 326 | ||
| Chapter 8: Stock Valuation | 327 | ||
| Opening Vignette | 327 | ||
| Valuation: Obtaining a Standard of Performance | 328 | ||
| Valuing a Company and Its Future Performance | 298 | ||
| Developing a Forecast of Universal’s Financial Performance | 334 | ||
| The Valuation Process | 337 | ||
| Stock Valuation Models | 338 | ||
| The Dividend Valuation Model | 339 | ||
| Other Approaches to Stock Valuation | 347 | ||
| Other Price-Relative Procedures | 352 | ||
| Summary | 354 | ||
| Discussion Questions | 356 | ||
| Problems | 357 | ||
| Case Problem 8.1 | 362 | ||
| Case Problem 8.2 | 363 | ||
| Excel@Investing | 363 | ||
| Chapter-Opening Problem | 364 | ||
| Chapter 9: Market Efficiency and Behavioral Finance | 365 | ||
| Opening Vignette | 365 | ||
| Efficient Markets | 366 | ||
| The Efficient Markets Hypothesis | 368 | ||
| Market Anomalies | 374 | ||
| Possible Explanations | 376 | ||
| Behavioral Finance: A Challenge to the Efficient Markets Hypothesis | 378 | ||
| Investor Behavior and Security Prices | 378 | ||
| Implications of Behavioral Finance for Security Analysis | 385 | ||
| Technical Analysis | 386 | ||
| Measuring the Market | 387 | ||
| Trading Rules and Measures | 390 | ||
| Charting | 393 | ||
| Summary | 397 | ||
| Discussion Questions | 398 | ||
| Problems | 399 | ||
| Case Problem 9.1 | 402 | ||
| Case Problem 9.2 | 404 | ||
| Excel@Investing | 405 | ||
| CFA Exam Questions | 406 | ||
| Chapter 10: Fixed-Income Securities | 408 | ||
| Opening Vignette | 408 | ||
| Why Invest in Bonds? | 409 | ||
| A Brief History of Bond Prices, Returns, and Interest Rates | 410 | ||
| Exposure to Risk | 414 | ||
| Essential Features of a Bond | 416 | ||
| Bond Interest and Principal | 416 | ||
| Maturity Date | 416 | ||
| Principles of Bond Price Behavior | 417 | ||
| Quoting Bond Prices | 419 | ||
| Call Features—Let the Buyer Beware! | 419 | ||
| Sinking Funds | 420 | ||
| Secured or Unsecured Debt | 420 | ||
| Bond Ratings | 421 | ||
| The Market for Debt Securities | 424 | ||
| Major Market Segments | 424 | ||
| Specialty Issues | 432 | ||
| A Global View of the Bond Market | 436 | ||
| Convertible Securities | 438 | ||
| Convertibles as Investment Outlets | 438 | ||
| Sources of Value | 441 | ||
| Measuring the Value of a Convertible | 441 | ||
| Summary | 445 | ||
| Discussion Questions | 447 | ||
| Problems | 448 | ||
| Case Problem 10.1 | 451 | ||
| Case Problem 10.2 | 452 | ||
| Excel@Investing | 453 | ||
| Chapter-Opening Problem | 454 | ||
| Chapter 11: Bond Valuation | 455 | ||
| Opening Vignette | 455 | ||
| The Behavior of Market Interest Rates | 456 | ||
| Keeping Tabs on Market Interest Rates | 456 | ||
| What Causes Rates to Move? | 457 | ||
| The Term Structure of Interest Rates and Yield Curves | 459 | ||
| The Pricing of Bonds | 464 | ||
| The Basic Bond Valuation Model | 465 | ||
| Annual Compounding | 465 | ||
| Semiannual Compounding | 467 | ||
| Accrued Interest | 468 | ||
| Measures of Yield and Return | 469 | ||
| Current Yield | 469 | ||
| Yield to Maturity | 470 | ||
| Yield to Call | 474 | ||
| Expected Return | 475 | ||
| Valuing a Bond | 477 | ||
| Duration and Immunization | 477 | ||
| The Concept of Duration | 478 | ||
| Measuring Duration | 479 | ||
| Bond Duration and Price Volatility | 481 | ||
| Effective Duration | 482 | ||
| Uses of Bond Duration Measures | 483 | ||
| Bond Investment Strategies | 485 | ||
| Passive Strategies | 485 | ||
| Trading on Forecasted Interest Rate Behavior | 486 | ||
| Bond Swaps | 486 | ||
| Summary | 488 | ||
| Discussion Questions | 489 | ||
| Problems | 490 | ||
| Case Problem 11.1 | 493 | ||
| Case Problem 11.2 | 493 | ||
| Excel@Investing | 494 | ||
| CFA Exam Questions | 496 | ||
| Chapter 12: Mutual Funds and Exchange-Traded Funds | 498 | ||
| Opening Vignette | 498 | ||
| The Mutual Fund Concept | 499 | ||
| An Overview of Mutual Funds | 499 | ||
| Exchange-Traded Funds | 507 | ||
| Some Important Considerations | 509 | ||
| Other Types of Investment Companies | 511 | ||
| Types of Funds and Services | 514 | ||
| Types of Mutual Funds | 514 | ||
| Investor Services | 519 | ||
| Investing in Mutual Funds | 522 | ||
| Investor Uses of Mutual Funds | 522 | ||
| The Selection Process | 523 | ||
| Investing in Closed-End Funds | 525 | ||
| Measuring Performance | 528 | ||
| Summary | 533 | ||
| Discussion Questions | 535 | ||
| Problems | 535 | ||
| Case Problem 12.1 | 538 | ||
| Case Problem 12.2 | 539 | ||
| Excel@Investing | 539 | ||
| Chapter-Opening Problem | 540 | ||
| Chapter 13: Managing Your Own Portfolio | 541 | ||
| Opening Vignette | 541 | ||
| Constructing a Portfolio Using an Asset Allocation Scheme | 542 | ||
| Investor Characteristics and Objectives | 542 | ||
| Portfolio Objectives and Policies | 542 | ||
| Developing an Asset Allocation Scheme | 542 | ||
| Evaluating the Performance of Individual Investments | 546 | ||
| Obtaining Data | 546 | ||
| Indexes of Investment Performance | 547 | ||
| Measuring the Performance of Investments | 547 | ||
| Comparing Performance to Investment Goals | 550 | ||
| Assessing Portfolio Performance | 551 | ||
| Measuring Portfolio Return | 552 | ||
| Comparison of Return with Overall Market Measures | 555 | ||
| Portfolio Revision | 558 | ||
| Timing Transactions | 559 | ||
| Formula Plans | 559 | ||
| Using Limit and Stop-Loss Orders | 563 | ||
| Warehousing Liquidity | 563 | ||
| Timing Investment Sales | 564 | ||
| Summary | 565 | ||
| Discussion Questions | 567 | ||
| Problems | 569 | ||
| Case Problem 13.1 | 573 | ||
| Case Problem 13.2 | 574 | ||
| Excel@Investing | 575 | ||
| CFA Exam Questions | 577 | ||
| Chapter 14: Options: Puts and Calls | 579 | ||
| Opening Vignette | 579 | ||
| Call and Put Options | 580 | ||
| Basic Features of Calls and Puts | 580 | ||
| Options Markets | 583 | ||
| Stock Options | 584 | ||
| Options Pricing and Trading | 587 | ||
| The Profit Potential from Puts and Calls | 588 | ||
| Intrinsic Value | 589 | ||
| What Drives Option Prices | 594 | ||
| Trading Strategies | 598 | ||
| Stock-Index and Other Types of Options | 606 | ||
| Contract Provisions of Stock-Index Options | 606 | ||
| Investment Uses | 609 | ||
| Other Types of Options | 610 | ||
| Summary | 613 | ||
| Discussion Questions | 614 | ||
| Problems | 615 | ||
| Case Problem 14.1 | 618 | ||
| Case Problem 14.2 | 618 | ||
| Excel@Investing | 619 | ||
| Chapter-Opening Problem | 620 | ||
| Chapter 15: Futures Markets and Securities | 621 | ||
| Opening Vignette | 621 | ||
| The Futures Market | 622 | ||
| Market Structure | 622 | ||
| Trading in the Futures Market | 625 | ||
| Commodities | 628 | ||
| Basic Characteristics | 628 | ||
| Trading Commodities | 633 | ||
| Financial Futures | 636 | ||
| The Financial Futures Market | 636 | ||
| Trading Techniques | 640 | ||
| Financial Futures and the Individual Investor | 643 | ||
| Options on Futures | 644 | ||
| Summary | 646 | ||
| Discussion Questions | 648 | ||
| Problems | 649 | ||
| Case Problem 15.1 | 651 | ||
| Case Problem 15.2 | 652 | ||
| Excel@Investing | 653 | ||
| CFA Exam Questions | 654 | ||
| Glossary | G-1 | ||
| Index | I-1 | ||
| Web Chapters | 16-1 | ||
| Chapter 16: Investing in Preferred Stocks | 16-1 | ||
| Chapter 17: Tax-Advantaged Investments | 17-1 | ||
| Chapter 18: Real Estate and Other Tangible Investments | 18-1 | ||
| Key Equations | BEP1 | ||
| Back Cover | Back Cover |