Chapter 3: Overview of Security Types

 New Material: NASD’s new TRACE system and transparency corporate bond market.

Derivative securities.
New Material: Obtaining futures contract and option contract price quotes using the Internet.

Chapter 6 Common Stock Valuation

 New Section: Residual income model (RIM).

 New Material: Updated McGraw-Hill valuation detailed example.

Chapter 7 Stock Price Behavior and Market Efficiency

New Material: Event studies using actual events surrounding Elan Corporation.

New Material: Informed traders, insider trading, and illegal insider trading.

Expanded Material: Market efficiency and the performance of professional money managers.

Expanded Material: Anomalies.

New Material: Bubbles and crashes.

Chapter 8 New Chapter Behavioral Finance and the Psychology of Investing

New Material: Introduction to behavioral finance.

New Material: Prospect theory.

New Material: Overconfidence, misperceiving randomness, and overreacting to chance events.

New Material: Sentiment-based risk and limits to arbitrage.

Expanded Material: Technical analysis.

Chapter 9 Interest Rates

Interest rate history.
New Example: A quick review of the time value of money. Money market rates and their prices.

Chapter 10 Bond Prices and Yields Duration.

New Material: Bond risk measures based on duration.

Chapter 11 Diversification and Risky Asset Allocation

The Markowitz efficient frontier.
New Material: Illustrating the importance of asset allocation using three securities.

Chapter 12 Return, Risk, and the Security Market Line

 New Material : Extending CAPM.

Chapter 13 Performance Evaluation and Risk Management

Enhanced Example: VaR for a Sharpe optimal portfolio.

Chapter 14 Futures Contracts

Stock index futures.
New Example: Changing the beta of a stock portfolio using stock index futures.

Chapter 15 Stock Options

Option basics and option quotes.
New Material: Stock option ticker symbols.

Option payoffs and profits.
New Material: Option “moneyness.”

Chapter 16 Option Valuation

The Black-Scholes-Merton option pricing model.
New Material: Using an online option calculator.

Measuring the impact of changes in option inputs.
New Section: Hedging stock with stock options.

Chapter 17 Projecting Cash Flow and Earnings

Financial statement forecasting.
New Material: Percentage of sales approach.

New Material: A detailed case study valuing Starbucks Corporation.

Chapter 18 Corporate Bonds

Bond Indentures and callable bonds.
New Material: Make-whole call provisions.

Corporate bond credit ratings.
Enhanced Material: Bond yield spreads.

Chapter 19 Government Bonds

Government bonds basics, emphasizing U.S. government debt.
Enhanced Material: U.S. Savings Bond.

Municipal bonds and their credit ratings.
Updated Material: The size of bid-ask spreads in municipal bond markets.