finance 340 business finance. my background name: ken shah name: ken shah born: bombay, india born:...
Post on 20-Dec-2015
217 views
TRANSCRIPT
![Page 1: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/1.jpg)
FINANCE 340FINANCE 340
BUSINESS FINANCEBUSINESS FINANCE
![Page 2: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/2.jpg)
MY BACKGROUNDMY BACKGROUND
NAME: Ken ShahNAME: Ken Shah BORN: Bombay, IndiaBORN: Bombay, India PhD:PhD: University of OregonUniversity of Oregon INDUSTRY EXPERIENCE: INDUSTRY EXPERIENCE:
4 yrs trader/broker on Bombay Stock Exchange4 yrs trader/broker on Bombay Stock Exchange 3 yrs quantitative portfolio management research 3 yrs quantitative portfolio management research
in Portland, Oregonin Portland, Oregon
![Page 3: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/3.jpg)
RECENT RESEARCHRECENT RESEARCH
I investigate the choice of mix of debt and I investigate the choice of mix of debt and equity in a firm (called capital structure)equity in a firm (called capital structure)
I investigate why and how companies go I investigate why and how companies go public (IPOs) and how they do afterwardspublic (IPOs) and how they do afterwards
![Page 4: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/4.jpg)
SO THAT I CAN GET TO SO THAT I CAN GET TO KNOW YOU BETTER...KNOW YOU BETTER...
Avoid changing seatsAvoid changing seats Please bring name cards and display EVERY Please bring name cards and display EVERY
class class Drop by my office and introduce yourself!Drop by my office and introduce yourself! Sign and return Honor Code sheet by next Sign and return Honor Code sheet by next
classclass Attach your photo and tell me a bit about Attach your photo and tell me a bit about
yourself on the Honor Code sheetyourself on the Honor Code sheet
![Page 5: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/5.jpg)
COURSE OBJECTIVESCOURSE OBJECTIVES
Learn about Learn about markets and securitesmarkets and securites and and evaluate their risk and return characteristicsevaluate their risk and return characteristics
Learn how to make sensible Learn how to make sensible personalpersonal financial decisionsfinancial decisions
Learn how Learn how investment opportunitiesinvestment opportunities are are evaluated in corporationsevaluated in corporations
Learn to exploit Learn to exploit computers and Internetcomputers and Internet to to your advantage in financeyour advantage in finance
![Page 6: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/6.jpg)
COURSE PREREQUISITESCOURSE PREREQUISITES
ECO 271, ACCT 231; Junior standingECO 271, ACCT 231; Junior standing
I will assume you have an understanding of:I will assume you have an understanding of: Basic AlgebraBasic Algebra Basic StatisticsBasic Statistics Basic computers and InternetBasic computers and Internet Excel spreadsheetExcel spreadsheet
![Page 7: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/7.jpg)
General Nature of CourseGeneral Nature of Course I am not kidding, this class is not going to be I am not kidding, this class is not going to be
easy. It’s working with LOTS of numberseasy. It’s working with LOTS of numbers
Practice! Practice! Practice! That’s the only Practice! Practice! Practice! That’s the only way you will stay aheadway you will stay ahead
To stay ahead, you will need to spend about To stay ahead, you will need to spend about 2 - 3 hours per week outside of class2 - 3 hours per week outside of class
![Page 8: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/8.jpg)
OPTIONAL TEXTBOOKOPTIONAL TEXTBOOK Ross, Westerfield & Jordan (RWJ), Ross, Westerfield & Jordan (RWJ),
EssentialsEssentials of Corporate Finance of Corporate Finance
My class notes are based on above textMy class notes are based on above text
Course packet (slides) at Copymart or Course packet (slides) at Copymart or downloaded from course websitedownloaded from course website
![Page 9: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/9.jpg)
REQUIRED CALCULATORREQUIRED CALCULATOR
Financial Calculator - HP-10B or HP-17B Financial Calculator - HP-10B or HP-17B preferredpreferred
Other calculators will not be supportedOther calculators will not be supported Other calculators can be used but you will be Other calculators can be used but you will be
responsible for knowing how to use themresponsible for knowing how to use them
![Page 10: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/10.jpg)
Self-Study from WWWSelf-Study from WWW
You will be required to obtain and understand You will be required to obtain and understand information from WWWinformation from WWW
Details placed on webpage handout related to Details placed on webpage handout related to class topic of the weekclass topic of the week
You will be tested and responsible for You will be tested and responsible for knowing this material for the examknowing this material for the exam
Come prepared in class with answers to self-Come prepared in class with answers to self-study questions. Maybe asked to hand-instudy questions. Maybe asked to hand-in
![Page 11: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/11.jpg)
COURSE GRADECOURSE GRADE
Homework Assignments (4)Homework Assignments (4) 150150
Class presentationClass presentation 5050
Stock Market GameStock Market Game 100100
Attendance and Self-study WWWAttendance and Self-study WWW 5050
Midterm Exams (2)Midterm Exams (2) 400400
Final Exam (comprehensive)Final Exam (comprehensive) 250250
TotalTotal 10001000
![Page 12: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/12.jpg)
Class PresentationsClass Presentations
In groups of 3 studentsIn groups of 3 students Maximum of 10 minutesMaximum of 10 minutes Any finance-related WSJ articleAny finance-related WSJ article
20% choice of article20% choice of article 40% communication of important points,40% communication of important points, 40% new information not in article40% new information not in article
![Page 13: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/13.jpg)
Stock Market GameStock Market Game
Invest in stocks and index mutual fundInvest in stocks and index mutual fund
Follow performance using Internet and Follow performance using Internet and spreadsheetspreadsheet
Evaluate how you did at the end of quarterEvaluate how you did at the end of quarter
Learn about risk and return!Learn about risk and return!
![Page 14: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/14.jpg)
““House” RulesHouse” Rules Rules outlined in the syllabusRules outlined in the syllabus
Attendance is requiredAttendance is required
No makeups, no late submissions, no exceptionsNo makeups, no late submissions, no exceptions
No cheating! You and I have our mutual honor No cheating! You and I have our mutual honor code which you signed and handed incode which you signed and handed in
![Page 15: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/15.jpg)
Class ParticipationClass Participation
Participation is strongly urgedParticipation is strongly urged
Speak up! No question is stupidSpeak up! No question is stupid
Chances are, others are wondering about the Chances are, others are wondering about the same thing - don’t be shy!!same thing - don’t be shy!!
![Page 16: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/16.jpg)
Course OutlineCourse Outline
Intro to securities, markets, and calculating Intro to securities, markets, and calculating returnsreturns
Time Value of MoneyTime Value of Money Bond & Stock ValuationBond & Stock Valuation Capital BudgetingCapital Budgeting Diversification and Capital Asset Pricing Diversification and Capital Asset Pricing
Model (CAPM), WACCModel (CAPM), WACC
![Page 17: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/17.jpg)
Class Web PageClass Web Page
Announcements, handouts, lecture slides all Announcements, handouts, lecture slides all available at:available at:
http://fac-staff.seattleu.edu/kshahhttp://fac-staff.seattleu.edu/kshah
Feel free to use e-mail: Feel free to use e-mail: [email protected]@seattleu.edu You must include ‘FINC 340 F06’ in subject You must include ‘FINC 340 F06’ in subject
heading of emails addressed to meheading of emails addressed to me
![Page 18: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/18.jpg)
Intro to Markets & Intro to Markets & SecuritesSecurites
COMMON STOCKCOMMON STOCK
PREFERRED STOCKPREFERRED STOCK
MUTUAL FUNDSMUTUAL FUNDS
![Page 19: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/19.jpg)
Common StockCommon Stock
Residual ClaimResidual Claim Limited LiabilityLimited Liability Right to VoteRight to Vote
Elect Directors, Important IssuesElect Directors, Important Issues Right to DividendsRight to Dividends
Stock Dividends, Splits, Reverse SplitsStock Dividends, Splits, Reverse Splits
![Page 20: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/20.jpg)
Preferred StockPreferred Stock
Fixed DividendsFixed Dividends Cumulative DividendsCumulative Dividends
No VotesNo Votes Limited AppreciationLimited Appreciation
Combines Features of Common Stock and Combines Features of Common Stock and BondsBonds
![Page 21: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/21.jpg)
Stock ValueStock Value
Capital GainsCapital Gains DividendsDividends
FactorsFactors Earnings GrowthEarnings Growth Products & ServicesProducts & Services ManagementManagement Competition & Economic EnvironmentCompetition & Economic Environment
![Page 22: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/22.jpg)
Evaluating StocksEvaluating Stocks
Book ValueBook Value Earnings per ShareEarnings per Share Return on EquityReturn on Equity Payout RatioPayout Ratio
Annual Reports: Bal. Sheet, Inc. StmtsAnnual Reports: Bal. Sheet, Inc. Stmts Quarterly ReportsQuarterly Reports
![Page 23: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/23.jpg)
Trading StocksTrading Stocks
Primary MarketPrimary Market IPOs - Selling stock for the first timeIPOs - Selling stock for the first time Investment banks, underwritersInvestment banks, underwriters ProspectusProspectus
Secondary MarketSecondary Market Organized exchanges and dealer networksOrganized exchanges and dealer networks Trading of previously issued stockTrading of previously issued stock
![Page 24: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/24.jpg)
Trading Stock...Trading Stock... NYSE, Amex, OTC (Nasdaq)NYSE, Amex, OTC (Nasdaq) BrokersBrokers
Full Service, Discount, Deep Discount, On-lineFull Service, Discount, Deep Discount, On-line
DealersDealers Bid - Ask SpreadBid - Ask Spread
LiquidityLiquidity
![Page 25: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/25.jpg)
Types of TransactionTypes of Transaction
Buying with CashBuying with Cash Buying on MarginBuying on Margin
Borrowing part of purchase amount from brokerBorrowing part of purchase amount from broker Short SellingShort Selling
Borrowing stock, selling, buying back later, Borrowing stock, selling, buying back later, returning borrowed stockreturning borrowed stock
![Page 26: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/26.jpg)
Types of OrdersTypes of Orders Market OrderMarket Order
whatever is the current price in the marketwhatever is the current price in the market
Limit OrderLimit Order specify the highest price for buyingspecify the highest price for buying specify the lowest price for sellingspecify the lowest price for selling
Stop Loss/Gain Stop Loss/Gain order triggered only at a certain priceorder triggered only at a certain price
![Page 27: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/27.jpg)
Stock QuotationStock Quotation
%chg YTD%chg YTD 52 Weeks Hi Lo52 Weeks Hi Lo SymbolSymbol DivDiv Yld %Yld % PEPE VolVol Daily Hi, Lo, Close, Net ChgDaily Hi, Lo, Close, Net Chg
![Page 28: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/28.jpg)
Market IndicatorsMarket Indicators Dow Jones IndustrialDow Jones Industrial S & P 500S & P 500 Wilshire 5000Wilshire 5000
International TradingInternational Trading Tokyo - NikkeiTokyo - Nikkei London - FTSE ‘Footsie’London - FTSE ‘Footsie’ Frankfurt - DAXFrankfurt - DAX
![Page 29: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/29.jpg)
International InvestingInternational Investing
Today’s markest are global. But it exposes you Today’s markest are global. But it exposes you to:to:
Currency RiskCurrency Risk risk of converting currency back and forthrisk of converting currency back and forth
Political RiskPolitical Risk appropriation, nationalizations, confiscation by foreign appropriation, nationalizations, confiscation by foreign
governmentsgovernments
![Page 30: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/30.jpg)
Mutual FundsMutual Funds
Professional money managers investing on Professional money managers investing on behalf of other investorsbehalf of other investors
Investors buy Investors buy sharesshares of mutual funds of mutual funds Shares represent a claim on the investment Shares represent a claim on the investment
portfolio of mutual fundsportfolio of mutual funds Mutual funds can invest in stocks, bonds, real Mutual funds can invest in stocks, bonds, real
estate, gold, etc. etc.estate, gold, etc. etc.
![Page 31: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/31.jpg)
Types of Mutual FundsTypes of Mutual Funds
Closed-end FundClosed-end Fund
Open-end FundOpen-end Fund
![Page 32: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/32.jpg)
Closed-End FundsClosed-End Funds
Shares are sold, and money raised only onceShares are sold, and money raised only once i.e., fixed number of shares outstandingi.e., fixed number of shares outstanding
Investors may buy/sell closed-end fund shares Investors may buy/sell closed-end fund shares on exchanges like any other company shareson exchanges like any other company shares Subsequent buying/selling among investors does Subsequent buying/selling among investors does
not bring in/take out money from fundnot bring in/take out money from fund
![Page 33: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/33.jpg)
Closed-end Funds...Closed-end Funds...
Shares can sell at a Shares can sell at a premiumpremium or a or a discountdiscount from the per share net asset value (NAV) of from the per share net asset value (NAV) of the portfolio (after accounting for expenses for the portfolio (after accounting for expenses for operating the fund)operating the fund)
Reasons for premium/discount is not well Reasons for premium/discount is not well understoodunderstood
![Page 34: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/34.jpg)
Open-End FundsOpen-End Funds
Continuously issue/redeem shares to/from Continuously issue/redeem shares to/from shareholdersshareholders
Potentially unlimited # of sharesPotentially unlimited # of shares Investors buy/sell shares from the mutual fund Investors buy/sell shares from the mutual fund
companycompany Never sells at a premium or a discountNever sells at a premium or a discount
![Page 35: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/35.jpg)
Load v/s No-Load FundsLoad v/s No-Load Funds
No-Load FundsNo-Load Funds: no sales commission: no sales commission typically bought directly from fund mgmt typically bought directly from fund mgmt
company at NAVcompany at NAV can be bought from brokers e.g. Schwabcan be bought from brokers e.g. Schwab
Load FundsLoad Funds: charge sales commission: charge sales commission sold through brokers or directly from fundsold through brokers or directly from fund loads range around 3 to 5% - split between broker loads range around 3 to 5% - split between broker
& fund& fund
![Page 36: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/36.jpg)
Fund ExpensesFund Expenses
Separate from sales loadsSeparate from sales loads Compensation for managing the fundCompensation for managing the fund Range from .2 to 2.5%Range from .2 to 2.5% 12b-1 charges: SEC permitted use of fund 12b-1 charges: SEC permitted use of fund
assets for sales promotion, advertising, assets for sales promotion, advertising, brokerage commissionbrokerage commission
![Page 37: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/37.jpg)
Fund StylesFund Styles
Stock FundsStock Funds
Bond FundsBond Funds
Money Market FundsMoney Market Funds
Index FundsIndex Funds
![Page 38: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/38.jpg)
Stock FundsStock Funds
Growth vs. IncomeGrowth vs. Income
Sector FundsSector Funds e.g. Hi-Tech, Health Care, Gold etc.e.g. Hi-Tech, Health Care, Gold etc.
International FundsInternational Funds World, Europe, Asia, Latin America etc.World, Europe, Asia, Latin America etc.
![Page 39: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/39.jpg)
Bond FundsBond Funds
L. T. Gov’t SecuritiesL. T. Gov’t Securities very low riskvery low risk
Municipal SecuritiesMunicipal Securities Tax exemptTax exempt
CorporateCorporate High-grade, Junk Bond etc.High-grade, Junk Bond etc.
![Page 40: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/40.jpg)
Index FundsIndex Funds
Passive ManagementPassive Management try to track performance of popular indexestry to track performance of popular indexes
Very low expensesVery low expenses Good vehicle for diversificationGood vehicle for diversification Available for most popular stock and bond Available for most popular stock and bond
indexesindexes
![Page 41: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/41.jpg)
Fund FactsFund Facts
Most fund managers have have a hard time Most fund managers have have a hard time beating a passive indexing strategybeating a passive indexing strategy
No systematic difference in performance No systematic difference in performance between Load & No-load fundsbetween Load & No-load funds why pay load???why pay load???
Index funds have very low operating Index funds have very low operating expensesexpenses
e.g. Vanguard Index 500: .19%e.g. Vanguard Index 500: .19%
![Page 42: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/42.jpg)
PREVIEWPREVIEW
ReturnsReturns
![Page 43: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/43.jpg)
ReturnsReturns Returns are earned in 2 forms:Returns are earned in 2 forms:
DividendsDividends Cash distributionCash distribution
Capital Gains or LossesCapital Gains or Losses Rise or fall in stock valueRise or fall in stock value
Total $ Return = Div. Inc. + Cap. Gain (loss)Total $ Return = Div. Inc. + Cap. Gain (loss)
![Page 44: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/44.jpg)
Measuring ReturnsMeasuring Returns
Dollar ReturnsDollar Returns
Percentage ReturnsPercentage Returns
![Page 45: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/45.jpg)
Dollar ReturnsDollar Returns
Example:Example:
Buy 100 shares of Caterpillar at $55. Buy 100 shares of Caterpillar at $55. Dividends over the year are $1.40. Sell the Dividends over the year are $1.40. Sell the shares at 60.shares at 60.
Dollar Return?Dollar Return? % Return?% Return?
![Page 46: FINANCE 340 BUSINESS FINANCE. MY BACKGROUND NAME: Ken Shah NAME: Ken Shah BORN: Bombay, India BORN: Bombay, India PhD:University of Oregon PhD:University](https://reader035.vdocuments.site/reader035/viewer/2022062714/56649d4c5503460f94a29c82/html5/thumbnails/46.jpg)
ANOTHER EXAMPLEANOTHER EXAMPLE
Buy 100 shares of Microsoft at $140. No Buy 100 shares of Microsoft at $140. No dividends are paid. Sell Shares at $131.dividends are paid. Sell Shares at $131.
Dollar Returns?Dollar Returns? % Returns?% Returns?