NPV as a Capital Budgeting Evaluation Method

Projects which have positive NPV should, in theory, increase the value of a company as well as the value of its stock. This could help explain the popularity of NPV as a capital budgeting evaluation method. Relationship between NVP, company…

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Yield Conversion Based on Periodicity

In general, an annualized and compounded yield on a fixed rate bond depends on the number of periods in a year, called the periodicity of the annual rate, which typically matches the frequency of coupon payments. For instance, the annual…

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Professionalism in Investment Management

Investment management is an upcoming profession. This is evidenced by the following: The public understanding of its practice and codes are still growing. There is a lack of recognition by the regulators and the employers, which prevent the establishment profession…

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Ethics and Profession

A profession can be defined as the occupational group that is based on the unique education, specialist knowledge, and framework of practice and behavior that establishes community trust, respect, and recognition. A large proportion of professions outlines the importance of…

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Hypothesis Test on Correlation

The correlation between two variables measures the strength of the linear relationship between them. We wish to assess this relationship using the correlation coefficient. The assessment is based on whether the relationship occurs by chance or not. Intuitively, if the…

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Value at Expiration and Profit for Call and Put Options

In an options contract, two parties transact simultaneously. The buyer of a call or a put option is the long position in the contract while the seller of the option, also known as the writer of the option, is the…

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ESG Considerations in Portfolio Planning and Construction

Environmental, social and governance factors are collectively referred to by the acronym “ESG”. ESG integration is the practice of considering environmental, social, and governance factors in the investment process, and can be implemented across all asset classes, including equities, fixed…

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The Asset Management Industry

Buy-Side vs. Sell-Side Asset managers are typically referred to as being on the buy-side. This simply means they buy the products of sell-side firms. Buy-side firms include asset managers, hedge funds, institutional investors, and retail investors. On the other hand,…

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CFA Level 1 Study Notes – Economics

Study Session 4 Reading 12 – Topics in Demand and Supply Analysis – LOS 12a: calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure – LOS 12b: compare substitution and income effects –…

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Monte Carlo Simulation Vs Historical Simulation

Monte Carlo simulation and historical simulation are both methods that can be used to determine the riskiness of a financial project. However, each method uses different assumptions and techniques in order to come up with the probability distribution of possible…

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