How Securities are Traded参考.ppt

CHAPTER 3 How Securities are Traded CHAPTER 4 Mutual Funds and Other Investment Companies Information on Mutual Funds Wiesenberger’s Investment Companies Morningstar () Yahoo (/funds) Investment Company Institute () Directory of Mutual Funds * * * * * * * * * * * * * * * * * * * * * * * * * Margin Call Example 3.2 How far can the stock price fall before amargin call? Let maintenance margin = 30% Equity = 100P - $4000 Percentage margin = (100P - $4,000) / 100P (100P - $4,000) / 100P = 0.30 Solve to find: P = $57.14 Table 3.4 Illustration of Buying Stock on Margin Short Sales Purpose: to profit from a decline in the price of a stock or security Mechanics Borrow stock through a dealer Sell it and deposit proceeds and margin in an account Closing out the position: buy the stock and return to the party from which it was borrowed Short Sale:Initial Conditions Example 3.3 Dot Bomb 1000 Shares 50% Initial Margin 30% Maintenance Margin $100 Initial Price Sale Proceeds $100,000 Margin Equity $50,000 Stock Owed 1000 shares Example 3.3 (Ctd.)Dot Bomb falls to $70 per share Assets $100,000 (sale proceeds) $50,000 (initial margin) Liabilities $70,000 (buy shares) Equity $80,000 Profit = ending equity – beginning equity = $80,000 - $50,000 = $30,000 = decline in share price x number of shares sold short Short Sale - Margin Call How much can the stock price rise before a margin call? ($150,000* - 1000P) / (1000P) = 30% P = $115.38 * Initial margin plus sale proceeds Regulation of Securities Markets Major regulations: Securities Act of 1933 Securities Act of 1934 Securities Investor Protection Act of 1970 Self-Regulation Financial Industry Regulatory Authority CFA Institute standards of professional conduct Regulation of Securities Markets (Ctd.) Sarbanes-Oxley Act Public Company Accounting Oversight Board Independent financial experts to serve on audit committees of boards of directors CEOs and CFOs personally certify firms’ finan