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Unformatted text preview: EC 151 Ch: 14 The Basic Tools of Finance
Present Value: Measuring the time value of money Managing risk Asset valuation Finance 2 related elements in any financial decision Introduce tools to help us understand the decisions people make as participants in financial markets time and risk 1st: how to compare sums of money to different points in time 2nd: how to manage risk 3rd: build on analysis of time and risk to examine what determines the value of an asset Present value Present value Future value Compounding FYI: rule of 70 Managing Risk Risk Aversion The market for Insurance Diversification of idiosyncratic risk Tradeoff between risk and return idiosyncratic risk aggregate risk Managing Risk Asset valuation Fundamental Analysis The efficient markets hypothesis
informationally efficient random walk Case study: Random walks and index funds Market irrationality...
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This note was uploaded on 04/23/2008 for the course EC 151 taught by Professor Frascatore during the Fall '08 term at Clarkson University .
- Fall '08