Touchstones - Introductory Lecture The Touchstones of...

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Introductory Lecture: The Touchstones of Finance • Purpose: Provide a framework for integrating the principles of finance into a conceptual whole Introductory Lecture: The Touchstones of Finance Purpose: Provide a framework for integrating the principles of finance into a conceptual whole Value Additivity Market Efficiency NPV Option Pricing Portfolio Theory
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What is Finance? Finance is the study of the market processes that allocate society’s savings to the most productive uses. Finance is also concerned with how these market processes influence decision makers in business and government. Much of this effort involves studying how security values are established in the marketplace What is Finance? The dimensions of this task can be appreciated through the following definition of a security given by the Supreme Court: [A security is] a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or third party. Key points: Contract, transaction, or scheme common enterprise investor expects profits solely from other peoples’ efforts Other Peoples’ Money—Other Peoples’ Efforts
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How Does the Market Value a Company?
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