平狄克微观经济学Investment Time and Capital Markets.ppt

Chapter 15 Chapter 15 Investment, Time and Capital Markets Topics to be Discussed Stocks Versus Flows Present Discounted Value The Value of a Bond The Net Present Value Criterion for Capital Investment Decisions Adjustments for Risk Topics to be Discussed Investment Decisions by Consumers Investments in Human Capital Intertemporal Production Decisions – Depletable Resources How Are Interest Rates Determined? Introduction Markets for factors and output give a reasonably complete picture Capital markets are different Capital is durable It is an input that will contribute to output over a long period of time Must compare the future value to current expenditures Stocks Versus Flows Stock Capital is a stock measurement The amount of plant and equipment a company owns at a point in time Flow Variable inputs and outputs are flow measurements An amount needed or used per time period Stocks Versus Flows Profit is also a flow number Must know what the capital stock will allow the firm to earn a flow of profit Was the investment a sound decision? Must be able to value today the expected profit flow over time What is the flow of profit worth today? Present Discounted Value (PDV) Determining the value today of a future flow of income The value of a future payment must be discounted for the time period and interest rate that could be earned Interest rate – rate at which one can borrow or lend money Present Discounted Value (PDV) Future Value (FV) One dollar invested today should yield(1 + R) dollars a year from now (1 + R) is the future value of the dollar today What is the value today of getting $1 a year from now? What is the present discounted value of the $1? Present Discounted Value (PDV) Present Discounted Value (PDV) The interest rate impacts the PDV The lower the interest rate, the less you money you needed invest to reach your future goal We can see how different interest rates will give different future values PDV of $1 Paid in the Future Valuing Payment Streams Can d