Sam Had Been a Friend of Joe for a Considerable

question 122

Essay

Sam had been a friend of Joe for a considerable period of time and had often accompanied him as he sailed his classic yacht.Sam had often communicated to Joe how much he would like to have the boat.On Friday night,a friend told Sam that Joe had suffered some business reverses and was going to have to get rid of the yacht.Sam immediately wrote Joe a letter offering to purchase the yacht for $25 000.Unknown to Sam,Joe had written Sam a similar letter offering to sell the yacht for $25 000.These two letters passed in the mail.Joe received Sam's letter at about noon on Saturday,and Sam received Joe's letter at about 2:30 p.m.on Saturday.Are these people bound in contract? Explain.

Recognize the significance of asset allocation and its impact on investment performance.

Understand the concept of beta and alpha in evaluating portfolio performance.

Gain insight into the contribution of selection within markets to total excess return.

Comprehend the method for calculating total excess return on managed portfolios.

---

Definitions:

Common Shares

Shares of stock in a company that entitle the holder to dividends and voting rights in shareholder meetings.

Acquisition Differential

The difference between the purchase price of an acquired company and the sum of its net assets' fair values.

Retained Earnings

The portion of a company's profit not distributed to shareholders as dividends but kept in the company to reinvest in its core business or to pay debt.

Cost Method

An accounting approach for investments, outlining that an investment is recorded at its acquisition cost, adjusting for any dividends received.