Chapter 1 The Investment Setting(投资分析与投资组合管理)概要1.ppt

Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K. Reilly Keith C. Brown Chapter 1The Investment Setting Questions to be answered: Why do individuals invest ? What is an investment ? How do we measure the rate of return on an investment ? How do investors measure risk related to alternative investments ? Chapter 1The Investment Setting What factors contribute to the rates of return that investors require on alternative investments ? What macroeconomic and microeconomic factors contribute to changes in the required rate of return for individual investments and investments in general ? Why Do Individuals Invest ? By saving money (instead of spending it), individuals tradeoff present consumption for a larger future consumption. 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, the investor will demand an interest rate that exceeds the pure time value of money plus the inflation rate to provide a risk premium to cover the investment risk. Defining an Investment A current commitment of $ for a period of time in order to derive future payments that will compensate for: the time the funds are committed the expected rate of inflation uncertai