Bodie, Kane, Marcus Study Guide
Essentials of Investments, by Bodie, Kane and Marcus
8th Edition,
Teaching Notes
Chapter 01 - Investments: Background and Issues
CHAPTER ONE INVESTMENTS: BACKGROUND AND ISSUES
CHAPTER OVERVIEW
The purpose of this book is to a) help students in their own investing and b) pursue a career in the investments industry. To help accomplish these goals Part 1 of the text (Chapters 1through 4) introduces students to the different investment types, the markets in which the securities trade and to investment companies. In this chapter the student is introduced to the general concept of investing, which is to forego consumption today so that future consumption can be preserved and hopefully increased in the future. Real assets are differentiated from financial assets, and the major categories of financial assets are defined. The risk/return tradeoff, the concept of efficient markets and current trends in the markets are introduced. The role of financial intermediaries and in particular, investment bankers is discussed, including some of the recent changes due to the financial crisis of 2007-2008.
LEARNING OBJECTIVES
After studying this chapter, students should have an understanding of the overall investment process and the key elements involved in the investment process such as asset allocation and security selection. They should have a basic understanding of debt, equity and derivatives securities. Students should understand differences in the nature of financial and real assets, be able to identify the major players in the markets, differentiate between primary and secondary market activity, and describe some of the features of securitization and globalization of markets.
CHAPTER OUTLINE
1. Investing and Real versus Financial Assets
PPT 1-2 through PPT 1-6
Investing involves sacrifice. One gives up some current consumption to be able to consumer more in the future (or to be able to consumer at all in the future if the goal is simply capital
8th Edition,
Teaching Notes
Chapter 01 - Investments: Background and Issues
CHAPTER ONE INVESTMENTS: BACKGROUND AND ISSUES
CHAPTER OVERVIEW
The purpose of this book is to a) help students in their own investing and b) pursue a career in the investments industry. To help accomplish these goals Part 1 of the text (Chapters 1through 4) introduces students to the different investment types, the markets in which the securities trade and to investment companies. In this chapter the student is introduced to the general concept of investing, which is to forego consumption today so that future consumption can be preserved and hopefully increased in the future. Real assets are differentiated from financial assets, and the major categories of financial assets are defined. The risk/return tradeoff, the concept of efficient markets and current trends in the markets are introduced. The role of financial intermediaries and in particular, investment bankers is discussed, including some of the recent changes due to the financial crisis of 2007-2008.
LEARNING OBJECTIVES
After studying this chapter, students should have an understanding of the overall investment process and the key elements involved in the investment process such as asset allocation and security selection. They should have a basic understanding of debt, equity and derivatives securities. Students should understand differences in the nature of financial and real assets, be able to identify the major players in the markets, differentiate between primary and secondary market activity, and describe some of the features of securitization and globalization of markets.
CHAPTER OUTLINE
1. Investing and Real versus Financial Assets
PPT 1-2 through PPT 1-6
Investing involves sacrifice. One gives up some current consumption to be able to consumer more in the future (or to be able to consumer at all in the future if the goal is simply capital