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Chapter 1 Introduction to Finance Road Map Part A Introduction to ?nance. fiscal decisions and principles of ?nance. Present value. Part B rating of assets, given ignore rates. Part C Determination of discount rates. Part D Introduction to corporate ?nance. Main Issues Financial Challenges. Unifying beliefs. Opportunity Cost of corking and Present Value. fictional character of Financial foodstuffs. Objectives of Financial Manager. 1-2 Introduction to Finance Chapter 1 Contents 1 2 3 What is Finance? . . . . . . . . . . . . . . . . . . . . . . . . Time and Risk . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 3.2 3.3 3.4 3.5 1-3 1-8 Unifying Principles of Finance . . . . . . . . . . . . . . . . . 1-10 surmise of A Perfect Financial Market . . . . . . . . . . . . . 1-10 First Principle: No Arbitrage . . . . . . . . . . . . . . . . . . . . 1-11 2nd Principle: Preference . . . . . . . . . . . . . . . . . . . . . . 1-13 tertiary Principle: Optimization . . . . . . . . . . . . . . . . . . . . . 1-15 4th Principle: Market in Equilibrium . . . . . . . . . . . . . . . . 1-18 4 Opportunity Cost of Capital and PV . . . . . . . . . . . . . . 1-19 4.1 4.2 4.3 Opportnity Cost of Capital . . . . . . . . . . . . . . . . . . . . . 1-19 Present Value (PV) . . . . . . . . . . . . . . . . . . .

. . . . . . 1-20 Net Present Value and termination Rule . . . . . . . . . . . . . . . . 1-22 5 Role of Financial Market . . . . . . . . . . . . . . . . . . . . 1-25 5.1 5.2 Financial Market at Center of Universe . . . . . . . . . . . . . . . 1-25 Function of Financial Markets . . . . . . . . . . . . . . . . . . . . 1-27 6 7 8 Objectives of Financial Manager . . . . . . . . . . . . . . . . 1-31 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-37 Homework . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-38 15.407 words Notes Fall 2003 c Jiang Wang Chapter 1 Introduction to Finance 1-3 1... If you want to get a full essay, order it on our website: Orderessay

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