Lesson Six

Caution: I just draft the stuffs that I remember in the lesson which are not included in the handout of the instructor, so hopefully I do not interpret and remember something incorrectly

- High risk doesn't mean high return, but low risk must have low return

- the higher the coupon rate, the lower sensitivity of market interest rate; the longer the maturity, the higher the sensitivity of market interest rate

- I took the risk tolerance test today, my score is 29. I fall into the group of above-average tolerance for risk (29-32), you can try out in this website http://njaes.rutgers.edu/money/riskquiz/

- indirect investment ( e.g. bonds, fund with stock nature) > work better when one has no time and knowledge to manage

-trade-off of buying a house and renting a house

- the return is around 4 % if you own commericial properties

- hawker> somewhat make society stable> less people apply for comprehensive social security assistance

-when a company issues more shares, the share price probably falls

-callable bond> if the company pays off early with only the face value

-definition of investment, speculation and gambling in Longman dictationary

investment> the use of money to get a profit or to make a business activity successful

speculation >when you guess about the possible causes or effects of something without knowing all the facts, or the guesses that you make

gambling> when people risk money or possessions on the result of something which is not certain, such as a card game or a horse race

- the higher the interest rate or the longer the time, the lower the price of bond

- IPO> the quality of the share is not good> assign more to individual investors

-IPO sometimes may be set lower than the true price> let it have potential to increase

- winner's curse > one may think he will win intially, but ultimately it is not the case

-Ask price must be higher than bid price ( ask-bid is illustrated from the perspective of the dealer), the difference of ask and bid is spread

-REITs e.g. 823, 1881, 405

- some security companies exist because they provide some extra attributes which are not provided by the banks

- a recommended book: the handbook of fixed income securities- Frank Fabozzi