on empirical evidence concerning security returns. The em- pirical evidence chapter in this edition follows the efficient markets chapter so that the stu- dent can use the perspective of efficient market theory to put other studies on returns in context. Part IV is the first of three parts on security valuation. This Part treats fixed-income se- curities-bond pricing (Chapter 14), term structure relationships (Chapter 15), and inter- est-rate risk management (Chapter 16). The next two Parts deal with equity securities and derivative securities. For a course emphasizing security analysis and excluding portfolio theory, one may proceed directly from Part I to Part III with no loss in continuity. Part V is devoted to equity securities. We proceed in a "top down" manner, starting with the broad macroeconomic environment (Chapter 17), next moving on to equity valuation (Chapter 18), and then using this analytical framework, we treat fundamental analysis in- cluding financial statement analysis (Chapter 19). Part VI covers derivative assets such as options, futures, swaps, and callable and con- vertible securities. It contains two chapters on options and two on futures. This material covers both pricing and risk management applications of derivatives. Finally, Part VII presents extensions of previous material. Topics covered in this Part include evaluation of portfolio performance (Chapter 24), portfolio management in an in- ternational setting (Chapter 25), a general framework for the implementation of investment strategy in a nontechnical manner modeled after the approach presented in CFA study ma- terials (Chapter 26), and an overview of active portfolio management (Chapter 27). Front Matter Preface The McGraw−Hill Companies, 2001           PREFACE xv     SUPPLEMENTS   For the Instructor   Instructors Manual The Instructors Manual, prepared by Richard D. Johnson, Col- orado State University, has been revised and improved in this edition. Each chapter in- cludes a chapter overview, a review of learning objectives, an annotated chapter outline (organized to include the Transparency Masters/PowerPoint package), and teaching tips and insights. Transparency Masters are located at the back of the book.   PowerPoint Presentation Software These presentation slides, also developed by Richard D. Johnson, provide the instructor with an electronic format of the Transparency Masters. These slides follow the order of the chapters, but if you have PowerPoint soft- ware, you may customize the program to fit your lecture presentation.   Test Bank The Test Bank, prepared by Maryellen Epplin, University of Central