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Chapter 3

# BU473 Chapter Notes - Chapter 3: Neuropeptide Y, Money Market Fund, Preferred Stock

Department
Course Code
BU473
Professor
Steve Balaban
Chapter
3

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Chapter(3:(Selecting(Investments(in(a(Global(Market((
The\$Case\$for\$Global\$Investments\$
o More\$investment\$choices\$\$
o Rates\$of\$return\$are\$higher\$\$
o Low\$correlation\$reduces\$portfolio\$risk\$\$
Diversification\$\$
o Help\$reduce\$portfolio\$risk\$\$
o The\$correlations\$of\$returns\$between\$a\$single\$pair\$of\$countries\$changes\$over\$time\$because\$
the\$factors\$influencing\$the\$correlation\$change\$over\$time\$\$
o Reduce\$variability\$of\$returns\$over\$time\$\$
o Correlation*coefficients\$measure\$diversification\$contribution\$\$\$
Ranges\$from\$-1\$to\$+1\$
Do\$not\$combine\$investments\$with\$the\$same\$positive\$correlation\$\$
Combining*2*assets*with*negative*correlation*is*ideal*for*diversification*\$
Global*Bond*Portfolio*\$
o Low\$Positive\$Correlation\$\$
Low\$positive\$correlations\$among\$returns\$indicate\$substantial*opportunities*for*risk*
reduction\$\$
policies\$differ\$in\$each\$country\$\$
of*return*and*reduces*portfolio*risk*\$
Correlation\$of\$equities\$is\$similar\$to\$that\$of\$bonds\$\$
\$\$
Global\$Investment\$Choices\$\$
More\$investments\$available\$\$
Fixed\$Income\$Investments\$\$
Contractual\$payment\$schedule\$\$
Savings*accounts*\$
o Fixed\$earnings\$\$
o Convenient\$\$
o Liquid\$and\$low\$risk\$\$
o Low\$rates\$\$
o Certificate*of*Deposit*(CDs)*\$
<1\$year\$maturity\$and\$usually\$insured\$by\$CDIC\$\$
o Guaranteed*Investment*Certificates*(GICs)*\$
>1\$year\$maturity\$and\$usually\$insured\$by\$CDIC\$\$
Corporate*bonds*\$
Preferred*stock*\$
o Hybrid\$security\$\$
International\$Bond\$Investing\$\$
Eurobond,\$Maple\$bonds,\$international\$domestic\$bonds\$\$