ECO 1002 Lecture Notes - Lecture 14: Efficient-Market Hypothesis, Mutual Fund, Stock Market
19 Dec 2016
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Document Summary
Finance is a field of decision making: of allocation of resources over time and handling risk. Every pay check 15% social security is collected. Present value of future sum: the amount that would be needed today to yield that furuter sum at prevailing interest rates. Compounding- accumulation of sum of money where interest earned on the sum earns Rule of 70 variable grows at rate of x percent per year, the variable will double in 70/x years. Reducing risk: through divarication: diversification can reduce firm-specific risk- risk of one company, diversification cannot reduce market risk, which affects all companies in the stock market. If share price > value, the stock is overvalued. Fed reserve meet 6 times a year, they are thinking about raising interest rate in december, stock market has gone up. Monetary system is run by our central bank or federal reserve. People regularly use to buy goods and services form other.
