BU473 Lecture Notes - Limited Liability, Risk Premium, Fot

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11 Feb 2013
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Goals of investment: safety income - growth of capital. Expected return = anticipated return by some investors = risk-free rate (rf) + expected risk premium. Investment process: decision to invest - choice of investment: risk averseness, set up investment goals, risk-return analysis transaction monitor performance. Important considerations when investing: nothing is certain globalization - Tech advances (old econ vs. new econ) - institutional investors (vs ind investors) - Direct investing: non-marketable money mkt capital mkt derivatives mkt. Indirect investing: investment funds (open and closed end) Def"n: options limited liability . futures unlimited liability. Def"n: investment taxation: interest taxed as ordinary income dividends gross up and then apply tax credit cap gains only 50% is taxable, loss can be carried backwards 3 years and forwards indefinitely. Trust: passive investment; unmanaged, designed to be bought and held, goal is capital preservationminimum operating costs investment funds can be unit, open-end, or closed-end. Def"n: red herring = preliminary prospectus blue skied = gain approval.

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