TAILIEUCHUNG - Lecture Economics (19/e) - Chapter 34: Financial economics

After completing this chapter, students will be able to: Describe the idea of present value and explain why it is critical in making financial decisions; identify and distinguish between the most common financial investments: stocks, bonds, and mutual funds; discuss how investment returns compensate for being patient and for bearing risk; explain portfolio diversification and why it implies that investors can focus on nondiversifiable risk when evaluating an investment opportunity. | Financial Economics McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Financial Investment Economic investment New additions or replacements to the capital stock Financial investment Broader than economic investment Buying or building an asset for financial gain New or old asset Financial or real asset LO1 34- Present Value Present day value of future returns or costs Compound interest Earn interest on the interest X dollars today=(1+i)tX dollars in t years $100 today at 8% is worth: $108 in one year $ in two years $ in three years LO1 34- Present Value Model Calculate what you should pay for an asset today Asset yields future payments Asset’s price should equal total present value of future payments The formula: dollars today = X dollars in t years X ( 1 + i)t LO1 34- Applications Take the money and run Lottery jackpot paid over a number of years Calculating the lump sum value Salary caps and deferred compensation Calculating the value of deferred salary payments LO1 34- Popular Investments Wide variety available to investors Three features Must pay to acquire Chance to receive future payment Some risk in future payments LO2 34- LO2 Stocks Bonds Represents ownership in a company Bankruptcy possible Limited liability rule Capital gains Dividends Debt contracts issued by government and corporations Possibility of default Investor receives interest Popular Investments 34- Mutual Funds Company that maintains a portfolio of either stocks or bonds Currently more than 8,000 mutual funds Index funds Actively managed funds Passively managed funds LO2 34- Calculating Investment Returns Gain or loss stated as percentage rate of return Difference between selling price and purchase price divided by purchase price Future series of payments also considered into return Rate of return inversely related to price LO2 34- Arbitrage Buying and selling process to .

• Kinh tế học
• Economic principles
• Economic policies
• Lecture Economics
• Economic problem
• Financial economics
• Financial investment
• Principles of economics
• Lecture Principles of economics
• Aggregate demand
• Aggregate supply
• Short run economic fluctuations
• Economic fluctuations
• Market imperfections
• The international economy
• Economic growth
• Average labor productivity
• Short term economic fluctuations
• Symptoms of business cycles
• Lecture Microeconomics
• Economic rent
• Economic profit
• Modern economic growth
• Growth accounting
• Economic immigrants
• Legal immigrants
• Demand shocks
• Loanable funds theory
• Lecture Macroeconomics
• Kinh tế vĩ mô
• Economic theory
• Economic perspective
• Marginal analysis
• Economic systems
• Market system
• The cost of production
• Economic costs
• economic
• management
• Principles of Microeconomics
• ten principles of economics
• tradeoffs
• rational
• Micro ECON 5
• Economic analysis
• Economic decision makers
• Cost in the firm
• Production in the short run
• Thinking like an economist
• Economic models
• Circular flow diagram
• Production possibilities frontier