1. 1 Investments: Review for Midterm Business Administration 365 Professor Scott Hoover

2. 2 Introduction  Investments definition Three primary elements  The Investment Process Establish Investment Policy Analyze Securities Build a Portfolio Continual Monitoring and Updating of Portfolio Performance Evaluation

3. 3  Important Concepts time value of money the risk vs. return relationship  diversification market efficiency  Can we beat the benchmark?  Cautions  Who values stocks? Objectives  Perceptions vs. Reality

4. 4 Prices and Great Investors  Market Structure Participants Orders  Prices and Quotes terminology limit order book principles of market making How are prices determined? market efficiency

5. 5  Great Investors S&P 500 Index Warren Buffett Peter Lynch Bill Miller

6. 6 Time Value of Money  Present value  Future value  Growing annuities formulas How do we use those formulas?  Retirement application

7. 7 Financial Statement Analysis  Purpose  DuPont Analysis Layered approach Three primary factors  profit margin  asset turnover  leverage multiplier  Applications

8. 8 Risk and Return  What is risk?  How are risk and return related?  The CAPM intuition application problems with applying the CAPM  The WACC

9. 9 Exam Structure  True/False: 12 questions, 24 points  Qualitative: 3 questions, 36 points  Quantitative: 3 questions, 40 points  Notes The exam covers chapters 1-6 in your book The Warren Buffett Way will not be covered on the midterm Special emphasis on…  time value of money  risk-return relationship Results from homeworks are fair game.