FIN 301 Study Guide - Midterm Guide: Time Preference, Cash Flow, Zygosity
Document Summary
The wealth of the owners that, to become wealthy, maximize wealth for owners. Know that banks keep fractional reserves, charge interest to borrowers, pay interest to depositors. Know that there is no sense in which gold is backing the dollar. Know what a heterogeneous intertemporal cash flow is. Intertemporal- may open a different moments at different times. Cash flow- cash flows flowing from one to another. Know the three characteristics people generally desire of their positive cash flows: more, sooner, safer. Know what we consider reality to be in this class. Know that present values measure reality means that. If two heterozygous intertemporal cash flows, have the same pv, they are equivalent . What we care about from cash flow is the present value. Periodically resetting the base upon which interest is cumulative. The periodic change in the base upon which interest occurs, improves, approves such that new bases includes cumulative interest.
