UGBA 10 Lecture Notes - Lecture 7: Stock Market Index, Efficient-Market Hypothesis, Human Capital

• School: Berkeley
• Department: Business Administration Undergraduate Program
• Course: UGBA 10
• Professor: Omar Romero-Hernandez

Document Summary

Agenda: personal financial planning, bonds and stocks, risk vs return and costs. Learning objectives: aims of personal financial planning. Personal financial planning: ability to plan financial resources and liabilities to achieve goals, secure good place to live, have family life you want, educational needs, accumulate capital for various purposes, use debt wisely, live happy/productive life w/limited stress. Risk-return (risk reward) relationship: safer investment lower expected returns, riskier investment higher expected returns. Present value: cash now > cash in future, represented by t - # of yrs. If future cash has risk (might not get it) even worse: represented by r - expected rate of return, higher risk --. Higher expected return: present value (pv) = fv / (1+ r)^t, future value (fv) = pv x (1 + r)^t. T-bonds: trade in liquid market, shows estimate of interest rates every day, liquid market easily buy/sell, attractive to large investors, ex.