Investments Analysis and Management 14th Edition Jones Solution Manual
Solution Manual for Investments Analysis and Management 14th Edition Charles P. Jones, Gerald R. Jensen, ISBN: 1119578124, ISBN: 9781119578123
TABLE OF CONTENTS
Part 1 Background
1 Understanding Investments 1
2 Investment Alternatives 24
3 Indirect Investing 57
4 Securities Markets and Market Indexes 90
5 How Securities are Traded 114
Part 2 Portfolio and Capital Market Theory
6 The Risk and Return from Investing 139
7 Portfolio Theory 171
8 Portfolio Selection and Asset Allocation 197
9 Capital Market Theory and Asset Pricing Models 224
Part 3 Common Stocks: Analysis, Valuation, and Management
10 Common Stock Valuation 256
11 Common Stocks: Analysis and Strategy 293
12 Market Efficiency 315
Part 4 Security Analysis
13 Economy/Market Analysis 347
14 Sector/Industry Analysis 370
15 Company Analysis 389
16 Technical Analysis 421
Part 5 Fixed-Income Securities: Analysis, Valuation, and Management
17 Bond Yields and Prices 443
18 Bonds: Analysis and Strategy 470
Part 6 Derivative Securities
19 Options 498
20 Futures Contracts 532
Part 7 Investment Management
21 Managing Your Financial Assets 557
22 Evaluation of Investment Performance 579
ANSWERS TO END-OF-CHAPTER QUESTIONS
1.1. The term Investments can be thought of as representing the study of the investment process. An investment is defined as the commitment of funds to one or more assets to be held over some future period.
1.2. Traditionally, the investment decision process has been divided into security analysis and portfolio management.
▪ Security analysis involves the analysis and valuation of individual securities; that is, estimating value, which is a difficult job.
▪ Portfolio management utilizes the results of security analysis to construct portfolios. As explained in Part II, this is important because managing a portfolio differs from
evaluating its components.
1.3. The study of investments is important because almost everyone has wealth of some kind and will be faced with investment decisions some time in their lives. One area where individuals make important investing decisions is in their retirement plans, particularly IRAs and 401(k) plans. In addition, individuals often have some say in their retirement programs, such as allocation decisions to cash equivalents, bonds, and stocks.
The dramatic stock market gains of 1995-1999 and the sharp losses in 2000-2002 and 2008 illustrate well the importance of studying investments. Investors who were persuaded to go heavily in stocks reaped tremendous gains in their retirement assets as well as in their taxable accounts in 1995-1999 and then suffered sharp losses in 2000-2002 and 2008.
1.4. A financial asset is a piece of paper evidencing some type of financial claim on an issuer, whether private (corporations) or public (governments).
A real asset, on the other hand, is a tangible asset such as gold coins, diamonds, or land.
1.5. Investing involves a risk-return tradeoff. To have a chance to earn a return above that of a risk-free asset, investors must take risk. The larger the expected return, the greater the risk that must be taken.
The risk-return tradeoff faced by investors making investment decisions has the following characteristics:
The risk-return tradeoff is upward sloping because investment decisions involve
expected returns (vertical axis) versus risk (horizontal axis).
The vertical intercept is RF, the risk-free return available to all investors.
