© Prentice Hall, 2007Excellence in Business, 3eChapter Securities and Investment Strategies

© Prentice Hall, 2007Excellence in Business, 3eChapter SecuritiesInvestments StocksStocksMutualFundsMutualFundsBondsBonds

© Prentice Hall, 2007Excellence in Business, 3eChapter Stock certificate Authorized stock Issued stock Unissued stock Stock split Par value Stocks: Important Terms

© Prentice Hall, 2007Excellence in Business, 3eChapter Dividends Voting Rights LimitedLiabilityLiquidity CommonStock

© Prentice Hall, 2007Excellence in Business, 3eChapter Preferred Stock Convertible Convertible Cumulative Cumulative

© Prentice Hall, 2007Excellence in Business, 3eChapter SecuredBonds Debentures ConvertibleBonds CorporateBonds

© Prentice Hall, 2007Excellence in Business, 3eChapter InterpretationMoody’sS&PInterpretation Highest ratingAaaAAAPrime quality Very strong capacity to payAaAAHigh grade Highest ratingAaaAAAPrime quality Strong capacity to pay; somewhat susceptible to changing business conditions AAUpper-medium grade Very strong capacity to payAaAAHigh grade More susceptible than A rated bonds BaaBBBMedium grade Strong capacity to pay; somewhat susceptible to changing conditions AAUpper-medium grade Somewhat speculativeBaBBSomewhat speculative More susceptible than A rated bonds BaaBBBMedium grade SpeculativeBB Somewhat speculativeBaBBSomewhat speculative Vulnerable to nonpaymentCaaCCCPoor standing;may be in default SpeculativeBB Highly vulnerable to nonpaymentCaCCHighly speculative; often in default Vulnerable to nonpaymentCaaCCCPoor standing; may be in default Bankruptcy petition filed or similar action taken CC Lowest rated; extremely poor chance of ever attaining real investment standing Highly vulnerable to nonpaymentCaCCHighly speculative; often in default Corporate Bond Ratings

© Prentice Hall, 2007Excellence in Business, 3eChapter U.S. Government Securities and Municipal Bonds Treasury Notes Treasury Bills Treasury Bonds U.S. Savings Bonds

© Prentice Hall, 2007Excellence in Business, 3eChapter U.S. Government Securities and Municipal Bonds Municipal Bonds General Obligation Bonds Revenue Bonds Capital Gains

© Prentice Hall, 2007Excellence in Business, 3eChapter Retirement of Debt Serial bonds Term bonds Sinking fund Callable bonds

© Prentice Hall, 2007Excellence in Business, 3eChapter Mutual Funds Load Funds Open-EndFundsOpen-EndFunds No-LoadFundsNo-LoadFunds Closed-EndFundsClosed-EndFunds Diversify Investments Manage Investments Pool Money Spread Risk

© Prentice Hall, 2007Excellence in Business, 3eChapter Types of Mutual Funds Money-MarketGrowthBalancedIncome GlobalSectorInternationalIndex

© Prentice Hall, 2007Excellence in Business, 3eChapter Options and Futures RightBuyer’s BeliefSeller’s Belief Buy Stock At Fixed Price Until Expiration Date Price Of Underlying Stock Will Increase Price Of Underlying Stock Will Decrease Sell Stock At Fixed Price Until Expiration Date Price Of Underlying Stock Will Decline Price Of Underlying Stock Will Increase Call Option Put Option

© Prentice Hall, 2007Excellence in Business, 3eChapter Speculating in Commodities Agricultural Products Raw Materials

© Prentice Hall, 2007Excellence in Business, 3eChapter Securities Market SecondarySecondary SecuritiesExchangesSecuritiesExchanges PrimaryPrimary InitialOfferingsInitialOfferings

© Prentice Hall, 2007Excellence in Business, 3eChapter Types of Stock Exchanges AuctionDealerElectronic NYSENASDAQECNs

© Prentice Hall, 2007Excellence in Business, 3eChapter Old Way New Way Specialists and Market Makers ElectronicCommunications Networks (ECNs) Buying and Selling Securities Trading Floor Trading Floor Stock Specialist Stock Specialist Computer Computer Market Maker Market Maker Computer Computer Stock Broker Stock Broker Buying on The NYSE Buying on The NASDAQ Buying on An ECN

© Prentice Hall, 2007Excellence in Business, 3eChapter IndustrySelf-RegulationIndustrySelf-Regulation Federal Laws State Laws Discourage Price Manipulation Maximize Information Access Prohibit Selective Disclosure Promote Information Accuracy SEC Trading Oversight SEC Filing Requirements Regulation of Securities Markets

© Prentice Hall, 2007Excellence in Business, 3eChapter Ask These Questions Before You Invest 1.Is the investment registered with the SEC? 2.Have you read the audited financial statements? 3.Is a registered broker offering the investment? 4.What’s in it for the person touting the investment? 5.Should you trust /bulletin board advice?

© Prentice Hall, 2007Excellence in Business, 3eChapter Ask These Questions Before You Invest 6.Are you being pressured to act? 7.Does the investment promise you’ll get rich quick? 8.Does the investment match your objectives? 9.How easy would it be to sell your investment later? 10.Does the investment originate overseas?

© Prentice Hall, 2007Excellence in Business, 3eChapter Investment Objectives GrowthIncome Investment Safety Investment Liquidity Tax Concerns

© Prentice Hall, 2007Excellence in Business, 3eChapter Investment Portfolio Rate of Return DiversificationAsset Allocation Diverse Industries Global Investments Different Investments Cash Instruments Bonds Common Stocks

© Prentice Hall, 2007Excellence in Business, 3eChapter Market Order Limit Order Day Order Margin Trading Stop Order Open Order Discretionary Order Short Selling Buying and Selling Securities

© Prentice Hall, 2007Excellence in Business, 3eChapter Rising Stock Market Falling Stock Market Analyzing Financial News

© Prentice Hall, 2007Excellence in Business, 3eChapter Watching Market Indexes and Averages Dow Jones Industrial Average (DJIA)Dow Jones Industrial Average (DJIA) Standard and Poor’s 500 (S&P 500)Standard and Poor’s 500 (S&P 500) Wilshire 5000Wilshire 5000 NASDAQ Composite IndexNASDAQ Composite Index Nikkei 225 IndexNikkei 225 Index FTSE 100 IndexFTSE 100 Index

© Prentice Hall, 2007Excellence in Business, 3eChapter Interpreting Financial News Stock Exchange Reports Bond Quotation Tables Mutual Fund Quotations