Classical economist: economy move towards equilibrium at full

capacity and employment

Keynesian : C + I + G + (X M ) = AD. Equilibrium achieved when
value of current production equals planned aggregate expenditures.
Inherently unstable as prone to booms and busts. Changes in
demand magnified by multiplier cause wild swings in economy.
Monetariests: fluctuations in money supply cause fluctuations in real
economic output and major cause of inflation is excessive growth in
money supply.
Supply of money in country: M1 : Cash in circulation, checking
accounts (demand deposits), travelers checks , M2 : all M1, money
market mutual funds, depts. In savings accounts, time dept of less
than 100k
Monetary base = bank reserves + money in circulation
Interest rates: O/C of money. When I/R decreases, ppl more willing to
hold money and when ir increase, ppl less willing to hold money.
Quantity theory of money: MV = PY. Long run, Y and velocity dont
change and an increase in money supply will lead to increase in
price level.
Neutrality of money: In LR, real variables wont change.
Inflation: demand pull AD increase more than AS/ cost-push AS
decrease due to increase in cost of pdtn.
Phillips curve: inverse relationship between unemployment and
inflation
Nominal interest rates is the net result of inflation borrowers
increase demand for funds since they want to borrow now compared
to future and lenders reduce demand for funds as i/R too low to
compensate for inflation risk.
Auto stabilisers: budget deficits increase ( decrease) in recessions
(booms): corporate profits: progressive income taxes,
unemployment insurance program
Open-end funds sell at nav ( current market value of ASSETS
liabilities ) / no of shares outstanding. NAV usually below current
market price because current value of funds assets higher than
historical financial statements used in NAV calculation. plus any
shareholder fees fund impose, cant be sold at secondary market
whereas closed-end fund sells only at secondary market, price
determined by supply and demand forces.
Investment strategies: Style value, look for stocks incoorctly
priced given assets and earnings low p/e ratios, pay higher

dividends/ growth focus on issuers future earnings potential, id

stocks offering potential for growing earnings at above-average
rates.
Sector strategy
Index strategy: passive investing, lower mgt expense
Global: diversified portfolio from any country throughout the globe
Stable value: short term fixed income securities and guaranteed
investment contracts issued by insurance coys
Dollar-cost averaging: investor commits to invest a fixed dollar amt
on a regular basis.
Value averaging
ETF are open end companies mirroring composition of standard
indexes. Trade on a secondary market, redeemable in very large
blocks. ETF are certificates that grant owenerhsip over part of a
basket of individual stocks, trade at px that closely match
underlying assets and unwind when investors no longer want them.
Low fees compared to mutual funds, trade throughout the
dayprices updated, dividends reinvested immediately. MAY be
illiquid if light trading
Real estate calculation:
Cost approach: replacement cost of building and land
Sales comparison: compare with similar real estates, may not have
one that can be compared with
Income approach: perpetuity discount trype of model. Net income/
market req rate of return.
Discounted after-tax cash flow approach
Formative stage financing:
Angel investing idea stage to trans idea into biz plan and assess
market potential
Seed stage supports pdt dev/mkting efforts like research, first stage
VC invest
Early stage: move into operation but before commercial production
and sales
Later stage: before ipo aft commercial production and sales
Mezzanine stage: IPO
Exit strategies for private equity:
Trade sale: sale of coy to strategic buyer like a competitor
IPO: portfolio coy selling its shares including some or all of those
held by pte equity firms to public investors as to have potential for
highest price, mgt approval, publicity for pte equity firm but high
trans costs, long lead time , high disclosure req
Recapitalization: PEF maintains control. i/r lowPEF releverage and
pay iself a div, prelude to later exit
Secondary sales: sale to another pte equity firn/other invesots
Liquidation/write-off

Exhibit 13.Basic Forms of Real Estate Investments and

Examples
Debt

Equity

Priva
te

Mortgages
Construction
lending

Direct ownership of real estate. Ownership c

ownership, joint ventures, real estate limite
other commingled funds.

Publi
c

Mortgage-backed
securities
(residential and
commercial)
Collateralized
mortgage
obligations

Shares in real estate corporations

Shares of real estate investment trusts

Limit order: instructions to a broker/exchange to obtain best price

immed avail when filling order but in no event accept px higher than
a specified limit when buying or accept a price lower than a
specified price when selling
Stop loss order: trader has a specified stop price condition