of San Francisco Jack Treynor Treynor Capital Management Charles A. Trzincka SUNY Buffalo Yiuman Tse Suny Binghampton Gopala Vasuderan Suffolk University Joseph Vu De Paul University Simon Wheatley University of Chicago Marilyn K. Wiley Florida Atlantic University James Williams California State University at Northridge Tony R. Wingler University of North Carolina at Greensboro Hsiu-Kwang Wu University of Alabama Thomas J. Zwirlein University of Colorado at Colorado Springs   For granting us permission to include many of their examination questions in the text, we are grateful to the Institute of Chartered Financial Analysts. Much credit is due also to the development and production team: our special thanks go to Steve Patterson, Executive Editor; Sarah Ebel, Development Editor; Jean Lou Hess, Senior Project Manager; Keith McPherson, Director of Design; Susanne Riedell, Produc- tion Supervisor; Cathy Tepper, Supplements Coordinator; and Mark Molsky, Media Tech- nology Producer. Finally, we thank Judy, Hava, and Sheryl, who contributed to the book with their sup- port and understanding. Zvi Bodie Alex Kane Alan J. Marcus I. Introduction 1. The Investment Environment The McGraw−Hill Companies, 2001           C H A P T E R O N E