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Investments: An Introduction

By Herbert B. Mayo

13th Edition © 2021
Discipline:Finance
Course:Investments
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Introduce your students to today's most important investment topics from the perspective of an individual financial planner with Mayo's INVESTMENTS: AN INTRODUCTION, 13E. This edition uses an inviting approach to present the process of investing and the many alternatives available for constructing a strong investment portfolio. Through this process, students learn how to manage their own assets as active portfolio managers as well as how to let others manage their portfolios as informed, but passive, investors.

This comprehensive approach to investments takes students from mastering the fundamentals for the investing section of the CFP® exam through more advanced topics. The latest updates highlight changes in taxation and investment planning prompted by the 2018 Tax Cuts and Jobs Act (TCJA). Students also examine how the 2008 financial crisis is still impacting volatility in investments today.

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About this product

Introduce your students to today's most important investment topics from the perspective of an individual financial planner with Mayo's INVESTMENTS: AN INTRODUCTION, 13E. This edition uses an inviting approach to present the process of investing and the many alternatives available for constructing a strong investment portfolio. Through this process, students learn how to manage their own assets as active portfolio managers as well as how to let others manage their portfolios as informed, but passive, investors.

This comprehensive approach to investments takes students from mastering the fundamentals for the investing section of the CFP® exam through more advanced topics. The latest updates highlight changes in taxation and investment planning prompted by the 2018 Tax Cuts and Jobs Act (TCJA). Students also examine how the 2008 financial crisis is still impacting volatility in investments today.

EXPANDED END-OF-CHAPTER MATERIAL RESPONDS TO STUDENT FEEDBACK. This edition's now offers a larger number of "Relationships" and "Fundamental Worked Problems" at the end of each chapter, based on student requests. "Relationships" features ask students to think critically to determine the relationship between two things, such as how an increase in interest rates affects the price and face value of a bond.

END-OF-CHAPTER "FUNDAMENTAL WORKED PROBLEMS" GUIDE STUDENTS IN COMPLETING WORK STEP-BY-STEP. This helpful feature clearly illustrates basic problems covered in the chapter. Students can work the problems with immediate access to the detailed steps necessary to solve the problem as well as the solutions.

STUDENTS FOCUS ON THE CFP® TOPICS MOST IMPORTANT FOR TODAY’S EXAM. Widely recognized for its proven focus and clear presentation of CFP® testing topics, this edition continues to emphasize concepts students need for success when they take today’s CFP® exam.

FINANCIAL ADVISOR’S INVESTMENT CASE PREPARES STUDENTS FOR REAL INVESTMENT DECISIONS. Brief, engaging cases at the end of each chapter create a dynamic, continuing Financial Advisor’s Case that integrates each chapter’s materials. Students clearly see how concepts from each chapter apply to investment decisions from a financial planner’s perspective. Cases follow today’s proven format for effective learning.

Table of contents

Chapters

Cover Page
Title Page
Copyright Page
Dedication
Preface
Acknowledgments
Part 1. The Investment Process and Financial Concepts
Part 2. Investment Companies
Part 3. Investing in Common Stock
Part 4. Investing in Fixed-Income Securities
Part 5. Derivatives
Part 6. An Overview
Appendix A. Mathematical Tables
Show more

Part 1. The Investment Process and Financial Concepts

Chapter 1. An Introduction to Investments
Preview this section ↗
Portfolio Construction and Planning ↗
Preliminary Definitions ↗
Diversification and Asset Allocation ↗
Efficient and Competitive Markets ↗
Portfolio Assessment ↗
“Trading” versus “Investing” ↗
Assumptions ↗
Professional Designations and Certifications ↗
The Internet ↗
The Plan and Purpose of This Text ↗
Summary ↗
The Financial Advisor’s Investment Case ↗
Chapter 2. Securities Markets
Secondary Markets and the Role of Market Makers
Determination of Prices
Composite Transactions
The “Buy Side” and the “Sell Side” of the Street
The Mechanics of Investing in Securities
The Long and Short Positions
Types of Orders
Cash and Margin Accounts
Determining the Percentage Return on a Margin Purchase, Including Commissions, Interest Paid, and Dividends Received
Maintenance Margin
Delivery of Securities
The Cost of Investing
Impact of the Spread on the Cost of Investing
The Short Sale
The Short Sale and Dividends
Short-Interest Ratio
Foreign Securities
Regulation
The Federal Securities Laws
Sarbanes-Oxley Act of 2002
Other Regulations
Securities Investor Protection Corporation
Initial Public Offerings
Investment Banking
The Mechanics of Underwriting
Types of Agreements
The Prospectus
Volatility of IPOs
Lock-Ups
Shelf Registrations
Summary
Questions
Relationships and Illustrated Fundamental Problems
Problems
The Financial Advisor’s Investment Case
Chapter 3. The Time Value of Money
The Future Value of $1
The Present Value of $1
The Future Sum of an Annuity
The Present Value of an Annuity
Present Value and the Valuation of Stocks and Bonds
Illustrations of Compounding and Discounting
Equations for the Interest Factors
Nonannual Compounding
Uneven Cash Flows
Summary
Questions
Relationships and Illustrated Fundamental Problems
Problems
The Financial Advisor’s Investment Case
Appendix 3. Using Excel to Solve Time Value Problems
Chapter 4. Financial Planning, Taxation, and the Efficiency of Financial Markets
The Process of Financial Planning
The Specification of Investment Objectives
An Analysis of the Individual’s Environment and Financial Resources
Asset Allocation
Taxation
Capital Gains and Losses
Pension Plans
Individual Retirement Plans
Keogh Accounts (HR-10 Plan)
Nondeductible IRAs—The Roth IRA
Tax-Deferred Annuities
The Efficient Market Hypothesis
The Speed of Price Adjustments
Forms of the Efficient Market Hypothesis
Empirical Evidence for the Efficient Market Hypothesis: The Anomalies
Implications of the Efficient Market Hypothesis
Summary
Questions
Relationships
Problems
The Financial Advisor’s Investment Case
Appendix 4. The Deductible versus the Nondeductible IRA
Chapter 5. Risk and Portfolio Management
Return
Expected Return Expressed as a Probability
Sources of Risk
Total (Portfolio) Risk
The Measurement of Risk
Dispersion around an Investment’s Return
Standard Deviation as a Measure of Risk: One Asset
The Return and Standard Deviation of a Portfolio
Risk Reduction through Diversification: An Illustration
Tangible Assets and Diversification
Diversification and Asset Allocation
Portfolio Theory
The Markowitz Model
The Capital Asset Pricing Model
A Practical Capital Market Line
Beta Coefficients
Beta and the Security Market Line
Portfolio Betas
Arbitrage Pricing Theory
Summary
Questions
Relationships and Illustrated Fundamental Problems
Problems
Investment Assignment (Part 2)
The Financial Advisor’s Investment Case
The Financial Advisor’s Investment Case
Appendix 5

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