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Practical Investment Management 4th Edition Solution Manual

Ace your coursework with Practical Investment Management 4th Edition Solution Manual, designed to simplify complex topics.

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1Chapter 1The Concept of InvestingOUTLINEIntroductionInvesting DefinedInvestment AlternativesAssetsSecuritiesSecurity GroupingsThree Reasons for InvestingIncomeAppreciationExcitementThe Academic Study of InvestmentsTheoretical ResearchEmpirical ResearchProfessors vs. PractitionersSUMMARYEven in this short introductory chapter some of the terminology was probably unfamiliar: stocksplits, preferred stock, stop order, buying power, and so on. A substantial vocabulary is specific tothe investment field, and these terms need to become second nature to anyone involved in investingand investment management. Each chapter begins with a list of the KeyTerms covered within thatchapter. A good study technique is to focus on them.The theoretical discussions presented in this book deal generally with fundamental relationshipswe know absolutely. This background—coupled with coverage of market mechanics, folklore, andinstitutional detail—should help to develop an ability to speak intelligently about the investmentbusiness and to influence future financial decisions.ANSWERS TO END OF CHAPTER QUESTIONS AND PROBLEMS1.Saving is a short or long term activity associated with little chance of loss of principal.Investingis a long-term activity in a risky venture.The risk can be modest or substantialdepending on the characteristics of the investment.2.The SIPC provides investors who have accounts at a brokerage firm with protection againstfailure of the brokerage firm, loss by theft or fire, or fraud of a firm employee.It does notprovide protection against a loss in market value from making poor investments3.A financial asset on one person’s personal balance sheet also appears on someone else’sbalance sheet as a liability.Stocks and bonds are financial assets that appear on the righthand side of the corporate balance sheet. A real asset (such as land or gold) does not have acorresponding liability.

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