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36527_FM_ptg01_i-xx.indd 2 12/21/12 5:13 PM Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 2 12/21/12 5:13 PM Investments An Introd uction 11e Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 1 12/21/12 5:13 PM This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 2 12/21/12 5:13 PM Investments An Introd uction 11e Herbert B. Mayo The College of New Jersey Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 3 12/21/12 5:13 PM Investments: An Introduction, © 2014, 2011 South-Western, Cengage Learning Eleventh Edition ALL RIGHTS RESERVED. No part of this work covered by the copyright Herbert B. Mayo herein may be reproduced, transmitted, stored, or used in any form or by Senior Vice President, LRS/Acquisitions & any means graphic, electronic, or mechanical, including but not limited Solutions Planning: Jack W. Calhoun to photocopying, recording, scanning, digitizing, taping, web distribution, information networks, or information storage and retrieval systems, Editorial Director, Business & Economics: except as permitted under Section 107 or 108 of the 1976 United States Erin Joyner Copyright Act, without the prior written permission of the publisher. Editor-in-Chief: Joe Sabatino Executive Editor: Mike Reynolds For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706 Developmental Editor: Adele Scholtz For permission to use material from this text or product, Senior Brand Manager: Robin LeFevre submit all requests online at www.cengage.com/permissions Marketing Coordinator: Christopher Walz Further permissions questions can be emailed to Art and Cover Direction, Production [email protected] Management, and Composition: PreMediaGlobal ExamView® is a registered trademark of eInstruction Corp. Windows is Managing Media Editor: Scott Fidler a registered trademark of the Microsoft Corporation used herein under Rights Acquisition Director: Audrey license. Macintosh and Power Macintosh are registered trademarks of Pettengill Apple Computer, Inc. used herein under license. Rights Acquisition Specialist, Text and © 2008 Cengage Learning. All Rights Reserved. Image: Anne Sheroff Cengage Learning WebTutor™ is a trademark of Cengage Learning. Manufacturing Planner: Kevin Kluck Cover Image(s): ©mmaxer/Shutterstock Library of Congress Control Number: 2012951959 ISBN-13: 978-1-133-93652-7 ISBN-10: 1-133-93652-0 South-Western 5191 Natorp Boulevard Mason, OH 45040 USA Cengage Learning is a leading provider of customized learning solutions with office locations around the globe, including Singapore, the United Kingdom, Australia, Mexico, Brazil, and Japan. Locate your local office at: www.cengage.com/global Cengage Learning products are represented in Canada by Nelson Education, Ltd. For your course and learning solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com Printed in the United States of America 1 2 3 4 5 6 7 16 15 14 13 12 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 4 12/21/12 5:13 PM Dedication In memory of a best friend and companion . . . Tinker Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 5 12/21/12 5:13 PM Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 6 12/21/12 5:13 PM Brief Contents part 1 The Investment Process and Financial Concepts 1 chapter 1 An Introduction to Investments 3 chapter 2 Securities Markets 17 chapter 3 The Time Value of Money 58 chapter 4 Financial Planning, Taxation, and the Efficiency of Financial Markets 94 chapter 5 Risk and Portfolio Management 128 part 2 Investment Companies 193 chapter 6 Investment Companies: Mutual Funds 195 chapter 7 Closed-end Investment Companies, Real Estate Investment Trusts (REITs), and Exchange-Traded Funds (ETFs) 234 part 3 Investing in Common Stock 263 chapter 8 Stock 265 chapter 9 The Valuation of Common Stock 315 chapter 10 Investment Returns and Aggregate Measures of Stock Markets 355 chapter 11 The Macroeconomic Environment for Investment Decisions 391 chapter 12 Behavioral Finance and Technical Analysis 411 part 4 Investing in Fixed-Income Securities 435 chapter 13 The Bond Market 437 chapter 14 The Valuation of Fixed-Income Securities 472 chapter 15 Government Securities 525 chapter 16 Convertible Bonds and Convertible Preferred Stock 571 part 5 Derivatives 607 chapter 17 An Introduction to Options 609 chapter 18 Option Valuation and Strategies 653 chapter 19 Commodity and Financial Futures 701 part 6 An Overview 743 chapter 20 Financial Planning and Investing in an Efficient Market Context 745 vii Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 7 12/21/12 5:13 PM Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 36527_FM_ptg01_i-xx.indd 8 12/21/12 5:13 PM