EFB210 Lecture Notes - Lecture 1: General Insurance, Money Market, Capital Market
Week 1 Finance 1 Lecture Notes
Introduction to Finance
Content
1. Introduction to Finance
2. Introduction to Finance cont. and Simple Interest
3. Financial Mathematics
4. Security Valuation
5. Capital Budgeting 1
6. Capital Budgeting 2
7. Writing for Finance and Basic Statistics of Finance
8. Portfolio Theory and CAPM
9. Weighted Average Cost of Capital
10. Introduction to Derivatives and Risk Management
11. Market Efficiency
12. Working Capital Management
Assessment
1. Mid-Semester Exam (25%):
• Multiple Choice
• Topics 1-5
• Saturday 21 April 2018 (TBC).
2. Report (25%)
• Report and Analysis
• Primarily relates to topics 5 and 6
• Due Monday 14 May 2018
3. Final Exam (50%)
• Short Answer
• Topics 6-12
• During Central Exam Period
Finance overview
• Finance examines the effective and efficient acquisition and utilisation of capital. It
has two main areas of study
o Corporate Finance (firm)
o Investment (investor)
• In both areas, we examine the ability to create value
o e.g. ability to identify investments that add value, IPod or CLEM7
o e.g. ability to outperform the market
Transfer of: capital/Consumption
and risk
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Financial markets
• There are many ways to classify financial markets
o Equity, Debt, Currency, Commodity or Derivative
o Primary or Secondary
o Exchange-traded or Over-the-counter
o Money Market (maturity < 12 months) or capital market (maturity > 12
months)
o Equity $ turnover relatively small
• Financial institutions
o Table highlights various types of institutions and assets under management
($ billions) as of September 2015
o ADIs are the largest sector ($3990.2) with just under twice the assets of Life
Offices and Superannuation Funds ($1709.2).
• Self-Managed Super Funds
o approx. $589.9 billion
ASSETSO FFIN AN C IA LIN STITUTIO N S
$billions(Se p
201 5)
Authoris edde pos it- tak ing ins titutions (A D Is)
Ba nks (Othe rtha nRB A) 3931.3
Bui l di ngs oci e ti es 16.5
Credi tunions 42.4
Tota lADIs 3990.2
RegisteredFinancialCorporations(RF Cs)
Moneyma rketcorporati ons 66.0
Fina nce compa ni e sa ndge nera l fi na nci ers 128.8
Tota lRFCs 194.8
Lifeofficesandsuperannuationfunds
Li fe i ns ura nce offi ce s 243.9
Supe rannua tionfunds 1465.3
Tota l l i fe offi ce s a nds u pe ra nnu a tio n 1709.2
Otherm anag edfunds
Publ i cUn i tTrus ts 278.2
Cas h Man a ge me ntTrus ts 33.2
CommonFunds 8.1
FriendlySoci e ti es 5.2
Tota lothe rma na ge dfunds 324.7
Otherfinancialinstitutions
Ge ne ra l i ns u ra nce offi ce s 173.2
Se curi ti s a ti on veh icl e s 140.3
Tota lothe rfi na ncia li ns titutions 313.4
Source: http://www.rba.gov.au/statis tics /tables/xls/b01hist.xls
find more resources at oneclass.com
find more resources at oneclass.com
• Goal of the Financial Manager
o Maximise Profits?
▪ Not necessarily because you could undertake an investment that
while profitable does not yield an appropriate level of return.
o Maximise Value?
▪ This is the basic goal of finance in that we will follow:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Finance overview: finance examines the effective and efficient acquisition and utilisation of capital. It has two main areas of study: corporate finance (firm) In both areas, we examine the ability to create value: e. g. ability to identify investments that add value, ipod or clem7, e. g. ability to outperform the market. Offices and superannuation funds (. 2): self-managed super funds, approx. Bui l di ng(cid:9)s oci e ti e s. Fi na nce (cid:9)compa ni e s (cid:9)a nd(cid:9)ge ne ra l (cid:9)fi na nci e rs. Li fe (cid:9)i ns ura nce (cid:9)offi ce s. Tota l (cid:9)l i fe (cid:9)offi ce s (cid:9)a nd(cid:9)s upe ra nnua ti on. Ca s h(cid:9)ma na ge me nt(cid:9)trus ts. Ge ne ra l (cid:9)i ns ura nce (cid:9)offi ces. Se curi ti s a ti on(cid:9)ve hi cl e s. Tota l (cid:9)othe r(cid:9)fi na nci a l (cid:9)i ns ti tuti ons.
