How to use this guide
Where this guide comes from. It follows the course's published description (security analysis and investments: how markets work, how securities are valued, and how portfolios are built for different investor goals, with capital allocation, diversification, the pricing of stocks, bonds and derivatives, and market efficiency) and the standard topics for an investments course. Instructors' emphasis and notation vary: check your own course outline. The calendar lists the course as "Security Analysis and Investments".
The order. 01 sets out the investment environment and how returns are measured. 02 and 03 are portfolio theory: diversification, the efficient frontier, the optimal risky portfolio and how an investor splits money between it and a safe asset. 04 turns that into pricing models, CAPM and the index model, with a look at multifactor ideas. 05 asks whether prices can be beaten at all (market efficiency) and where human behaviour pushes back. 06 and 07 value bonds and measure their rate risk with duration and convexity. 08 values shares. 09 is a first look at options and futures.
Inside a topic: read the idea, look at the formula, then open the worked example and follow every step. Close it and redo it on paper. Then change the numbers in the lab until the answer stops surprising you, and finish with the traps.
Notation used here: r is a rate of return, E(r) an expected return, σ a standard deviation, ρ a correlation, rf the risk-free rate, w a portfolio weight, β beta, α alpha, y a bond's yield, D duration, A risk aversion. Money is in Canadian dollars. Percentages are written 5.4%, but formulas use decimals (0.054) unless a worked example says otherwise.
Rounding. Carry full precision on a calculator and round only the final answer. Rounded intermediate steps can move an answer by a few cents or a few hundredths of a percent; the drills allow for that.
Short refresher from the intro finance course. You need these before the new material. If any is shaky, spend ten minutes on it first.
Then practise. The Drill, the multiple-choice bank and the flashcards are all levelled:
| Level | What it asks | Example |
|---|---|---|
| Beginner | A definition, or one step: one formula, one answer | What was a share's holding period return? |
| Intermediate | A standard problem in a few steps | Find a two-asset portfolio's standard deviation, or price a semi-annual bond |
| Exam level | A full exam-style question that strings several steps together | Pick the optimal risky weight, or estimate a price change from duration |
| Hard | Twists: working backwards, several methods, unusual set-ups | Compare duration-only and convexity-adjusted estimates with the exact price, or replicate an option |
The question generator starts on Auto (ramps up): it begins at Beginner and moves up a level after three correct answers in a row. You can pick a level yourself at any time. The multiple-choice bank and flashcards are ordered from easy to hard, so working through them in order builds each idea from the ground up.
Exam format, weight and allowed aids differ between sections and terms. Check your own course outline.
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This is the first section. The full guide has every topic, the labs and the practice questions.
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