1. Slide 21–1

2. Chapter Twenty One Investment Banks, Brokerage Firms, and Mutual Funds

3. Slide 21–3 Investment Banks Intermediaries that help corporations raise funds by selling securities in the financial markets Investment banks may underwrite a security issue

4. Slide 21–4 Underwriting Stocks and Bonds Giving Advice –When to offer? –At what price? Filing Documents –SEC –Registration statement –Prospectus Underwriting –Syndicate Marketing Outcomes –Fully subscribed –Undersubscribed –Oversubscribed Best Efforts

5. Figure 21-1: Front Page of a Prospectus

6. Slide 21–6 Ten Largest Underwriters in the U.S.

7. Slide 21–7 Securities Brokers and Dealers Brokerage Service –Securities Orders Market Order Limit Order –Other Services Margin Credit Full-Service Brokers versus Discount Brokers Securities dealers hold securities and make a market

8. Slide 21–8 Mutual Funds Mutual funds pool the resources of many small investors by selling them shares and using the proceeds to buy securities

9. Slide 21–9 Types of Mutual Funds

10. Slide 21–10 Mutual Fund Families (Complexes) Investment companies usually offer a number of different types of mutual funds Investors can often move investments among these funds without penalty The complexes often issue consolidated statements Mutual fund fact book http://www.ici.org/aboutfunds/factbook_toc.html

11. Mutual Fund Complexes, Assets, and Total Number of Funds

12. Slide 21–12 Mutual Funds on the Rise Figure 21-2 from Financial Markets and Institutions, Third Edition

13. Slide 21–13 Figure 21-4: Distribution of Mutual Fund Assets, 1986 and 2001

14. Slide 21–14 Figure 21-6: Average Asset Allocation for All 401(k) Plan Balances

15. Slide 21–15 Figure 21-5: Household Ownership of Mutual Funds, 1980–2000 Household Ownership of Mutual Funds

16. Slide 21–16 Fee Structure of Investment Funds Open-End Fund Closed-End Fund –Load Funds –No-Load Funds

17. Calculating a Mutual Fund’s Net Asset Value Net Asset Value (NAV) Definition: Total value of the mutual fund’s stocks, bonds, cash, and other assets minus any liabilities such as accrued fees, divided by the number of shares outstanding

18. Hedge Funds Take advantage of unusual spreads between security prices Often highly leveraged Relatively unregulated Figure 21-7: The Price of Two Similar Securities