CHAPTER 1 DISCUSSION 1. Briefly discuss each of the eight s.docx

CHAPTER 1
DISCUSSION:
1. Briefly discuss each of the eight steps in the investment
planning process. (p. 1)
2. Explain the importance of client assessment and capital
markets assessment. (pp. 1-2)
3. Describe the three types of investments that can be included
within a portfolio. (p. 2)
4. Discuss the importance of continuous monitoring of
portfolios. (p. 3)
CHAPTER 2
DISCUSSION:
1. Describe some of the debt instruments that may be included
in a money market fund and the nature of these type
instruments. (p. 5)
2. Explain how an investor might manage interest rate risk
through the use of CDs. (p. 7, item #8)
3. Briefly discuss the nature of fees associated with the
purchase of CDs as they relate to (a) banking institutions and
(b) brokerage firms. (p. 9)
CHAPTER 3
DISCUSSION:
1. Describe why a risk adverse investor would be inclined to
favor a direct issue of Treasury Department over a corporate

issue of similar length to maturity. (pp. 13-14)
2. Discuss the tax ramifications of purchasing a T-bill on the
open market prior to its maturity. (pp. 14-15)
3. Briefly discuss, if all government securities with like
maturites have the same risk/reward characteristics, WHY an
investor might be selective in the type of security he purchases?
(p. 16)
CHAPTER 4
DISCUSSION:
1. Explain the rationale behind why an investor might choose
NOT to sell bonds. (pp.20-21)
2. Discuss how interest income is usually received and the tax
ramifications to an investor who receives such income in a
taxable account. (pp. 21-22)
3. Briefly explain what the affect of interest rate movements are
on the price of corporate bonds, especially as it relates to their
term to maturity. (p. 24)
Chapter 5
DISCUSSION:
1. Briefly discuss how a convertible security can offer a “floor”
value below which an investor can protect his investment (pp.
27-28)
2. Explain why the rates offered by convertible securities are
generally lower than those available on nonconvertible issues of
similar quality (p. 29)

3. Tell how profits and losses on a preferred stock are treated
(p. 29)
4. Discuss the major advantages of an investor who buys a
“stock purchase warrant” and a nonconvertible bond (pp. 27-28)
CHAPTER 6
DISCUSSION:
1. Distinguish between the three types of municipal bonds
presented in the introduction, and decide when investors might
find these financial instruments to be a useful “tool” in their
portfolios (p. 35)
2. Explain why a risk averse investor might prefer investing in a
“general obligation’ bond, rather than a “revenue bond” (p. 36)
3. Elaborate upon the selection process that should be
considered when contemplating the direct purchase of municipal
bonds (pp. 39-40)
CHAPTER 7
DISCUSSION:
1. Briefly discuss how “stripped bonds” are “manufactured,”
and how these issues are priced to be competitive. (p.43)
2. Explain why investors should exercise caution in selecting
target-maturity funds. (p. 43)
CHAPTER 8
DISCUSSION:

1. Identify a zero-coupon bond that has a convertible feature.
(p. 46)
2. Discuss the tax implications of investing in zeros in a taxable
account. (p. 45)
3. How might zero-coupon bonds be utilized by a parent looking
to save enough dollars to fund a college education for his
daughter? (p.45)
CHAPTER 10
DISCUSSION:
1. Briefly discuss how deposits and premiums paid to an
insurance company factor into the purchase of GICs that are
held by it (p. 53)
2. Discuss how the term “Guaranteed” might be misunderstood
by individuals looking for a safe and secure investment (pp. 53-
54)
3. 3. Explain how an investor’s expectation of future interest
rate movements might influence his choice of GIC type (p. 54)
CHAPTER 11
DISCUSSION:
1. Explain why common stock ownership might be preferable to
direct ownership of real estate (p. 57)
2. Discuss what investors should anticipate receiving in terms
of total return (pp. 57-58)
3. Discuss the different ways in which common stock may be
owned (p. 59)

4. List some of the sources that provide information such as
stock listings, trading activity, and security analysis (pp. 59-60)
CHAPTER 23
DISCUSSION:
1. Briefly discuss what is meant by the term “guaranteed,” as it
relates to an annuity (pp. 167-168)
2. Explain the impact inflation may have on a long-term payout
when the annutiy is (a) fixed, (b) variable (p. 169)
3. Identify the occasions when a penalty for premature
distributions of annuity assets does NOT apply (pp. 169-170)
4. Discuss how annuities are treated during the accumulation
phase (p. 171)
CHAPTER 28
DISCUSSION:
1. Briefly discuss how the price of gold is generally determined
(p. 243)
2. Explain when a taxable loss in a precious metal investment is
recognized and one circumstance where it may not be. (p. 244)
3. List two advantages of “storage certificate programs” as
opposed to taking physical delivery of a precious metal. (p.
245)
CHAPTER 9
DISCUSSION:

1. Briefly discuss when an individual might find that the use of
this tool would be advantageous (p. 48)
2. List and explain briefly the different methods by which
“note” repayment may be scheduled (pp. 49-50)
3. In each of the following circumstances regarding the use of
promissory notes, answer “Yes” or “No” and briefly explain the
reasoning behind your answer:
A. Can a promissory note actually be sold?
B. Can a “note” agreement specify a minimum period for which
the balance will be outstanding?
C. Are loan forms for promissory notes readily available or very
sparse?
(pp. 49-50)
CHAPTER 12
DISCUSSION:
1. Explain what is meant when preferred dividends are
“passed,” and the implications for regular common stockholders
of the company (p. 65)
2. Discuss the implication of “participating” preferred stock
issue ownership (p. 66)
3. Identify the MAIN characteristic that differentiates payments
issued by regular corporate bonds and those dividend payments
of a preferred stock issue (pp. 65-66)
4. Describe the risk profile of an investor who expresses above
average interest in owning preferred stocks (p. 68)
CHAPTER 13
DISCUSSION:

1. Distinguish between a rights offering and a warrant (pp. 71-
72)
5. Explain the significance of the fundamental (intrinsic) value
that a warrant possesses (p. 74)
6. Briefly discuss how longer term (LEAPs) call options parallel
some of the characteristics retained by warrants (pp. 72 and 74)
7. Discuss how the use of leverage (as it relates to the exercise
of a stock warrant) impacts the total return for an investor if:
(a) the underlying stock price increases or (b) the underlying
stock price decreases (p. 72)
CHAPTER 14
DISCUSSION:
A. Briefly explain why “put” options work as natural opposites
to “call” options (p. 81)
B. Determine if leverage plays any significant role in the use of
stock options and if so, does whether it appeals only to the
speculator (p. 82)
C. Explain why these options commonly referred to as “wasting
assets.” (p. 83)
D. Discuss how time management plays a role in the use of a
short-term call option and the purchase of a LEAP (p. 83)

CHAPTER 16
DISCUSSION:
1. Discuss how all “open” positions at a tax year’s end are
treated (p. 101)
2. Briefly explain what role a “commodity pool” might play as a
viable alternative to a commodity futures investment (p. 101)
3. Discuss the high risk nature of investing in these type
contracts and determine what role margin plays in the
“riskiness” of such investments (pp. 100-101)
CHAPTER 17
DISCUSSION:
1. Distinguish between “no-load,” “back-load,” and “12b-1”
fees (p. 108)
2. Explain the importance of a mutual fund’s historical
performance and some key points to consider when utilizing this
information (p. 110)
3. Discuss the importance in distinguishing between diversified
and non-diversified funds in an investment portfolio, as well as
how this will affect its risk profile (p. 111)
4. List some of the different sources you can research for
information on mutual funds and fund investing (pp. 111-113)
CHAPTER 19
DISCUSSION:

1. Distinguish between a mutual fund and a hedge fund (p. 133)
2. Explain the importance of a hedge fund’s historical
performance and some key points to consider when utilizing this
information (pp. 135-136)
3. Discuss the importance of using professional management
when investing in hedge funds (p. 133)
4. List some of the different sources you can research for
information on hedge funds and fund investing (p.137)
CHAPTER 20
DISCUSSION:
1. Briefly discuss what a separately managed account is and
how it differs from a pooled account (p. 139)
2. Explain how an SMA works (p. 139)
3. Explain when an SMA should be chosen over another form of
investment (p. 140)
CHAPTER 21
DISCUSSION:
1. Briefly discuss what a structured product is (pp. 143-144)
2. Explain how a structured product works (p. 144)
3. 3. Explain the advantages and disadvantages of investing in a

structured product (pp. 144-145)
CHAPTER 24
DISCUSSION:
1. Discuss how “psychic income” concerns may play a role in an
investor desiring to invest in real estate (p. 195)
2. Identify typical expenses that an investment property owner
can deduct for income tax purposes, and contrast them with
activity that must be “capitalized” (pp. 195-196)
3. Describe the tax implications of IRC Section 483 on a seller
of real estate (pp. 198-199)
4. Explain some benefits resulting from the real estate
ownership in corporate form (pp. 202-204)
CHAPTER 26
DISCUSSION:
1. Distinguish between “straight” and “modified” pass-through
certificates (p. 229)
2. List the three elements of a monthly distribution that an
investor in a mortgage-backed security receives (p. 226)
3. Discuss the risk vs. return tradeoff when investing in
mortgage-backed securities (pp. 224-225)
4. Describe the consequences of one or more mortgages in an
underlying pool of mortgages going into default (p. 227)
CHAPTER 27
DISCUSSION:

1. Briefly discuss why an investor desiring a passive role in
nonfinancial asset investing might be interested in an oil and
gas reserves operation. (p. 235)
2. Explain the difference between “percentage depletion” and
“cost depletion.” (pp. 235-236)
3. List some of the alternatives available to risk-seeking
investors who are NOT interested in oil and gas tax shelters (p.
237)
CHAPTER 28
DISCUSSION:
1. Briefly discuss how the price of gold is generally determined
(p. 243)
2. Explain when a taxable loss in a precious metal investment is
recognized, and one circumstance where it may not be. (p. 244)
3. List two advantages of “storage certificate programs” as
opposed to taking physical delivery of a precious metal. (p.
245)
CHAPTER 30
DISCUSSION:
1. Distinguish between a master limited partnership and a
private limited partnership (p. 255)
2. Explain the ways in which “leverage” can affect an
investment in limited partnerships (p. 256)

3. State some reasons why a careful reading of any partnership
agreement is important, especially as it relates to liability
concerns and payments to investors (pp. 258-259)
CHAPTER 31
DISCUSSION:
1. Briefly explain what is meant by the terms “letter stock” and
“mezzanine financing” (p. 263)
2. Explain why privately-placed debt issues normally provide a
higher rate of return than do securities that are traded publicly
(pp. 264-265)
3. Discuss how mergers and acquisitions play a role in venture
firms (pp. 263-264)
CHAPTER 33
DISCUSSION:
1. Explain why focusing only on the potential for loss in a
portfolio is insufficient in explaining what investment risk
really is (p. 271)
2. Distinguish between inflation risk and inflation as tax (p.
275)
CHAPTER 34
DISCUSSION:
1. Distinguish among the following risk measurement terms:
beta, r-squared, covariance, and correlation coefficient (pp.
286-289)

2. Define the nature of probability distributions and the two
types associated with them (pp. 281-282)
3. Discuss the importance of an investment advisor being able
to explain to his or her client why a mutual fund characterized
by a very low standard deviation could be riskier than a similar
type fund with a higher absolute number (pp. 281-282)
4. Discuss the problem raised when calculating standard
deviation using probability distributions (pp. 282-285)
CHAPTER 35
DISCUSSION:
1. Briefly discuss the main disadvantage of relying too heavily
upon a mathematical “solution” to a financial planning task (pp.
298-299)
2. Explain how the valuation formula of a perpetual bond, for
time value purposes, is most useful (p. 300)
3. Distinguish between the results arrived at after calculating
for (a) an ordinary annuity payment and, (b) an annuity due
payment (pp. 305-306)
4. Discuss what is mean by the “effective annual rate” when
there is more than one compounding period in a year (p. 312)
CHAPTER 36
DISCUSSION:

1. List the six components or sources of return for which proper
analysis of an investment’s return must include (pp. 317-323)
2. Briefly explain how a simple arithmetic average return for an
investment over a 2-year period can overstate its “real” rate of
return (pp. 318-319)
3. Discuss the implications of the following statement: “It’s not
how much you earn on an investment, it’s how much you keep”
(pp. 316-323)
4. Explain the shortcomings of the IRR Method, especially as it
relates to cash flows emanating from an investment (pp. 328-
330)
CHAPTER 37
DISCUSSION:
1. The coupon rate is also known as the stated rate. How is this
interest generally paid? Is there any time when no cash flow is
received from a bond? (p. 345)
2. Discuss how investors arrive at a desired rate of return for a
bond (pp. 345-348)
3. Explain why a bond’s yield-to-maturity is the “effective rate”
that the holder of the bond expects to receive (pp. 348-351)
4. Briefly discuss the relationship between the formulas used to
calculate (a) the after-tax yield, and (b) the taxable equivalent
yield of a bond (pp. 349-350)
CHAPTER 38
DISCUSSION:

1. Briefly explain why, in valuing a stock, the variable of cash
flow “estimation” may pose a problem when calculating its
intrinsic value (p. 357)
2. Distinguish between the terms “capitalized earnings” and
“capitalization rate” (p. 361)
3. Describe the relationship between a dividend payout ratio and
a retained earnings ratio and determine whether one formula be
derived from the other (pp. 361-364)
CHAPTER 39
DISCUSSION:
1. Discuss the progression of the Markowitz portfolio model
into the capital market theory (p. 367)
2. Describe what is meant by the security market line being the
graphic representation of the capital asset pricing model (pp.
368-369)
3. Contrast the differences between option writing and option
buying (pp. 370-371)
4. Why isn’t the Black-Scholes option model based upon an
American style option? (p. 374)
CHAPTER 40
DISCUSSION:
1. Discuss the investment process and the general steps relating
to it (p. 379)

2. Briefly discuss the three phases in the investor life cycle (pp.
379-380)
3. Explain the dilemma posed when attempting to measure the
risk tolerance or preferences of a client, especially as it relates
to (a) indifference or utility curves and, (b) Prospect Theory
(pp. 380-381)
4. Discuss the importance of every financial advisor creating an
investment policy statement for each client (pp. 381-383)
5. Distinguish between the different risk-adjusted performance
measures: the (a) Sharpe ratio, (b) Treynor ratio, and (c)
Information ratio (pp. 384-385)
CHAPTER 41
DISCUSSION:
1. Briefly explain why having similarly correlated assets in a
portfolio may actually be more risky than having assets with a
low degree of correlation (pp. 389-390)
2. Describe how historical and expected relationships between
assets aid in the generation of an “efficient frontier” of
potential portfolios for consideration (p. 391)
3. Distinguish between strategic asset allocation and tactical
asset allocation (pp. –392-394)
4. Briefly explain how the “January effect” anomaly contradicts
the efficient market hypothesis or theory (p. 397)
CHAPTER 43
DISCUSSION:

1. Discuss how strictly adhering to an investment strategy of
dollar cost averaging over time should always result in a lower
average cost to the investor than if a share averaging strategy
was followed (pp. –413-415)
2. Describe the market environment when the investment
strategies of dollar cost averaging and bond laddering work best
(pp. 416-418)
3. Discuss how the strategy of immunization is related to (a)
reinvestment risk and (b) interest rate risk (pp. 416-417)
CHAPTER 44
DISCUSSION:
1. Analyze the different derivative security tools involved in
hedging, briefly explaining how each are used to attain its
objective to lower risk (pp. 421-422)
2. Discuss the implications of employing portfolio insurance in
an investment portfolio (p. 421)
3. Distinguish between the short sales of equity securities and
those of exchange-traded funds (p. 426)
4. Discuss the implications of the following statement: “The
derivative markets are actually negative-sum games.” (p. 428)
5. Define an offsetting notional principal contract and explain
when might an investor might engage in such a transaction (p.
441)
6. Explain how a combination of a long call and a short put
equates to holding a synthetic position in the underlying stock
(pp. 430-431)

CHAPTER 45
DISCUSSION:
1. Discuss the roles that initial margin and maintenance margin
play in the leveraging of investment assets in a client’s
portfolio (pp. 447-448)
2. Discuss the advantages and disadvantages of the leveraging
of financial assets (pp. 449-450)
3. Identify some of the alternative sources for “leverage”
borrowing (p. 451)
4. Discuss the tax implications of leveraging investments,
especially as it relates to capital gains and dividends under “the
tax rules until 2010” (p. 451)
Most Important Things Learned - What are the most important
things you learned from the study of this week's readings and
assignments?
QUESTION: After consulting the readings, what do identify as
some of the biggest challenges IGOs face when attempting to
preserve security? Is the United Nations Security Council
successfully meeting these challenges?
Note : use below reference and quoted from this reference, show
it how you utilize this ( below0 reference ) most of your
writing.
Hurd, Ian and Bruce Cronin (eds.). 2008. The UN Security
Council and the legitimacy of international authority. New
York: Routledge. [Introduction only, pages 1-25]
Chaulia, Sreeram. 2011. Library of International Relations:

International Organizations and Civilian Protection: Power,
Ideas, and Humanitarian Aid in Conflict Zones. I.B.
Taurus. Chapter 1, pages 17-22.
http://site.ebrary.com/lib/apus/reader.action?docID=10504520&
ppg=7
What is Security?
International organizations address security issues and
peacekeeping. Before we can understand how IOs contribute to
security, it’s useful to have an understanding of the concept of
“security” in hand. Broadly defined, “security” in international
relations refers to the protection of people and actors in the
international system. To more specifically define security might
risk leaving out some of the many areas, theories, and threats
that fall under this heading. On the other hand, broad
definitions can sometimes expand to the extent that they lack
any particular useful meaning.
The term “security” was long related to the idea of military
action, with the assumption that the central recipient of security
was the state. Over the last few decades the definition of
“security” has been widened to encompass problems that cannot
be always solved by militaries or confined to individual states.
In other words, security was long conceptualized in terms of
realism and the cold war context with an emphasis on military
action, but has recently been expanded by proponents of other
theories to include problems beyond state or national security.
As the preceding list illustrates, many security threats are
understood as transnational in scale and involve protection of
populations and communities who transcend state boundaries
(Hough 2008, 12-13, 20).
Even though the concept of security has moved away from a
strict focus on the state-centered paradigm, the nature of threats
are not always given proportional importance (e.g., concerning
the number of people affected). For example, government

security is often prioritized over the security of transnational
populations (Hough 2008, 19).
Security Organizations
The organizations most commonly associated with global
security are the United Nations (UN) and the North Atlantic
Treaty Organization (NATO), but numerous regional security
organizations also contribute. Regional organizations are
different from other types of IOs because they tend to be
defined by historical relationships, geographical proximity, or
economic blocs.
Examples of regional organizations:
- Organization for Security and Cooperation in Europe
(OSCE)
- The African Union (AU)
- Association of Southeast Asian Nations (ASEAN)
- Arab League (AL)
Chapter VIII of the UN Charter encourages multilateralism via
the cooperation of the UN Security Council with regional
arrangements for the maintenance of peace and security, but the
language of the chapter stipulates that the Security Council
retains primacy over other organizations in this regard.
One looming question about the role of international
organizations and security is what the relationships among
security IOs should be. For example, is a “division of labor”
among many security IOs optimal, or should larger
organizations like the UN bear the brunt of the work and
authority, creating a globally coherent approach to security
(see Patrick 2012 for one discussion of the UN versus regional
security organizations)?
The challenges associated with cooperation, consensus
building, and tensions among competing actors and interests are
one topic of our discussion forum this week.

The United Nations Security Council
The UN Charter grants the Security Council “primary
responsibility for the maintenance of international peace and
security” (The Security Council).
The Security Council consists of:
- Fifteen members total
- Five permanent members with veto power (China, France,
the Russian Federation, the United Kingdom, and the United
States)
- Ten members elected by the UN General Assembly with
limited two-year terms
o As of 2015, the ten elected members (and their end-of-term
dates) are: Angola (2016), Chad (2015), Chile (2015), Jordan
(2015), Lithuania (2015), Malaysia (2016), New Zealand
(2016), Nigeria (2016), Spain (2016), and Venezuela (2016).
Security Council decisions:
- Are determined by open ballot voting, requiring nine
affirmative votes to pass proposals
- Each member gets one vote
- Votes concern matters of
o UN military action (against aggressors)
o Economic sanctions and arms embargoes
- Permanent members can overturn passed proposals with a
negative vote; this is known as the veto power
Questions and points of debate about the Security Council:
- To whom is the Council accountable?
- Should the permanent members have veto power?
- Does the system of having permanent members privilege
the interests of the permanent members, or render the Council
ineffective on key decisions?

- Are members of the Council more likely to receive funds
from the IMF or World Bank?
- Are the term limits of non-permanent members
problematic?
Interactive task: Perhaps the most important question is whether
the Security Council should be revised. Here's a video on this
question produced by the Council on Foreign Relations. Pay
attention to the main reason this question is asked: the
international system doesn't look the same now as it did when
the Council was formed. The arguments for reform are detailed
after describing the distribution of power.

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CHAPTER 1 DISCUSSION 1. Briefly discuss each of the eight s.docx