TVM Extra Credit Review

1
TVM Extra Credit Review

• 6,000(1.05) / (.10-.05) 126,000
• This is the PV in year 5 (FV)
• 126,000 / (1.05)5 78,237
• 10,718 78,237 88,955
• Know application of formulas

2
Investment Professionals

• Financial Consultants Stockbrokers
• Series 7 (NASD) required
• Financial Planners
• Investments
• Insurance
• Estate Planning
• Certified Financial Planner (CFP)
• Analysts Money Managers
• Chartered Financial Analyst (CFA)

3
Equities Stocks

• Common Stock
• Represent the value of companies
• Not required to pay dividends
• Voting Non-Voting
• Preferred Stock
• Special Rights Dividends, voting, etc.

4
Private Equity

• Venture Capital provides start-up funds
• Private Placements (primary market)
• Initial Public Offerings (IPOs)
• VCs sell to public investors at a large gain
• Company founders insiders sell portion
• Shares trade on a secondary market
• Secondary offerings more shares sold

5
Exchanges

• New York Stock Exchange (NYSE)
• Mostly large, well-established companies
• Members buy Seats
• Crowd Specialists DOT
• National Assoc. of Securities Dealers Automated
  Quotation (NASDAQ)
• Computerized network of market makers

6
Institutional Market Players

• Sell Side (selling securities)
• Investment Bankers
• IPOs, secondaries, mergers acquisitions
• Analysts (Research)
• Traders (market making)
• Brokers (sales)
• Buy Side (buying securities)
• Ins. Cos., banks, pension funds, etc.
• Portfolio Managers Analysts

7
Indices

• Dow Jones Industrial Ave.
• 30 stocks, price-weighted
• Standard Poor 500
• Large cos., Market cap-weight, 10 sectors
• NASDAQ Composite
• Russell Indices
• Categorized by market cap style

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SP 500 Sectors

• Basic Materials chemicals, paper, etc.
• Industrials manufacturing
• Consumer Staples food basics
• Consumer Discretionary non-essentials
• Information Technology
• Financials banks, insurance, brokers, etc.
• Health Care
• Telecommunication
• Energy oil gas
• Utilities electricity generation transmisson

9
Trading Stocks

• Full-service Broker
• Provides information advice
• Typically 50 min. commission
• Discount Broker
• Provides information no advice (some)
• Lower commissions
• Electronic
• On-line information self-help
• Lowest commissions

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Trading Terms

• Round Lots 100 shares Odd lt 100
• Bid highest price willing to pay
• Ask (Offer) lowest price willing to sell
• Ask gt Bid difference is the spread
• Market Order buy at ask sell at bid
• Limit Orders specific price stops
• Good to Cancel (GTC) or Day