le01 The Investment Setting(资产定价-上海交大,蔡明超).ppt

Lec 1The Investment Setting 为了弥补50%的退步，我们往往需要付出100%的努力 ---股票市场启示录 The Investment Setting a) explain the concept of required rate of return and discuss the components of it. b) differentiate between the real and the nominal risk-free rate of return c) explain the risk premium and the associated fundamental sources of risk; d) define the security market line and discuss the factors that cause movements along, changes in the slope of, and shifts of the security market line. Why Do Individuals Invest ? By saving money (instead of spending it), individuals tradeoff present consumption for a larger future consumption. LOS a: concept of required rate of return and components of an investors required rate of return. The real risk free rate of interest: The real risk free rate of interest is determined by the supply and demand for funds in the economy. The inflation premium is an adjustment to the real risk free rate to compensate investors for expected changes in the price indexes and money market conditions being tightened or eased due to inflationary expectations. The risk premium is what investors demand for the uncertainty associated with an investment. How Do We Measure The Rate Of Return On An Investment ? The pure rate of interest is the exchange rate between future consumption and present consumption. Market forces determine this rate. How Do We Measure The Rate Of Return On An Investment ? People’s willingness to pay the difference for borrowing today and their desire to receive a surplus on their savings give rise to an interest rate referred to as the pure time value of money. How Do We Measure The Rate Of Return On An Investment ? If the future payment will be diminished in value because of inflation, then the investor will demand an interest rate higher than the pure time value of money to also cover the expected inflation expense. How Do We Measure The Rate Of Return On An Investment ? If the future payment from the investment is not certain,