金融基本工具ec ro nn po l em fics chapter presentation27.pptx

TheBasicToolsofFinanceEconomicsPRINCIPLESOFN.GregoryMankiwPremiumPowerPointSlides

byRonCronovich27

Inthischapter,

lookfortheanswerstothesequestions:Whatis“presentvalue”?Howcanweuseittocomparesumsofmoneyfromdifferenttimes?Whyarepeopleriskaverse?

Howcanrisk-aversepeopleuseinsurance

anddiversificationtomanagerisk?Whatdeterminesthevalueofanasset?

Whatisthe“efficientmarketshypothesis”?

Whyisbeatingthemarketnearlyimpossible?1

THEBASICTOOLSOFFINANCE2IntroductionThefinancialsystem

coordinatessaving

andinvestment.Participantsinthefinancialsystemmakedecisionsregardingtheallocationofresourcesovertime

andthehandlingofrisk.Financeisthefieldthatstudiessuch

decisionmaking.0

THEBASICTOOLSOFFINANCE3PresentValue:TheTimeValueofMoneyTocompareasumsfromdifferenttimes,weusetheconceptofpresentvalue.Thepresentvalueofafuturesum:theamountthatwouldbeneededtodaytoyieldthatfuturesumatprevailinginterestratesRelatedconcept:

Thefuturevalueofasum:theamountthesumwillbeworthatagivenfuturedate,whenallowedtoearninterestattheprevailingrate0

THEBASICTOOLSOFFINANCE4EXAMPLE1:ASimpleDepositDeposit$100inthebankat5%interest.

Whatisthefuturevalue(FV)ofthisamount?InNyears,FV=$100(1+0.05)NInthreeyears,FV=$100(1+0.05)3=$115.76Intwoyears,FV=$100(1+0.05)2=$110.25Inoneyear,FV=$100(1+0.05)=$105.000

THEBASICTOOLSOFFINANCE5Deposit$100inthebankat5%interest.

Whatisthefuturevalue(FV)ofthisamount?InNyears,FV=$100(1+0.05)NInthisexample,$100isthepresentvalue(PV).Ingeneral,FV=PV(1+r)N

whererdenotestheinterestrate(indecimalform).SolveforPVtoget:EXAMPLE1:ASimpleDepositPV=FV/(1+r)N0

THEBASICTOOLSOFFINANCE6EXAMPLE2:InvestmentDecisionSupposer=0.06.

ShouldGeneralMotorsspend$1