ISBN-10: 0130151025

ISBN-13: 9780130151025

Edition: 2nd 2000

Authors: Zvi Bodie, Robert C. Merton

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This introduction to finance has a broad scope, placing an emphasis on general principles within the field. It builds its presentation upon the three 'pillars' of finance: optimization over time, asset valuation and risk management.
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Book details

Edition: 2nd
Copyright year: 2000
Publisher: Prentice Hall PTR
Publication date: 8/16/1999
Binding: Mixed Media
Pages: 479
Size: 8.75" wide x 10.50" long x 1.00" tall
Weight: 2.530
Language: English

Finance and the Financial System
What Is Finance?
Defining Finance
Why Study Finance?
Financial Decisions of Households
Financial Decisions of Firms
Forms of Business Organization
Separation of Ownership and Management
The Goal of Management
Market Discipline: Takeovers
The Role of the Finance Specialist in a Corporation
The Financial System
What Is the Financial System?
The Flow of Funds
The Functional Perspective
Financial Innovation and the "Invisible Hand"
Financial Markets
Financial Market Rates
Financial Intermediaries
Financial Infrastructure and Regulation
Governmental and Quasi-Governmental Organizations
Appendix A
Appendix B
Interpreting and Forecasting Financial Statements
Functions of Financial Statements
Review of Financial Statements
Market Values versus Book Values
Accounting versus Economic Measures of Income
Returns to Shareholders versus Return on Book Equity
Analysis Using Financial Ratios
The Financial Planning Process
Constructing a Financial Planning Model
Growth and the Need for External Financing
Working Capital Management
Liquidity and Cash Budgeting
Time and Resource Allocation
The Time Value of Money and Discounted Cash Flow Analysis
The Frequency of Compounding
Present Value and Discounting
Alternative Discounted Cash Flow Decision Rules
Multiple Cash Flows
Perpetual Annuities
Loan Amortization
Exchange Rates and Time Value of Money
Inflation and Discounted Cash Flow Analysis
Taxes and Investment Decisions
Life-Cycle Financial Planning
A Life-Cycle Model of Saving
Taking Account of Social Security
Deferring Taxes through Voluntary Retirement Plans
Should You Invest in a Professional Degree?
Should You Buy or Rent?
How to Analyze Investment Projects
The Nature of Project Analysis
Where Do Investment Ideas Come From?
The Net Present Value Investment Rule
Estimating a Project's Cash Flows
Cost of Capital
Sensitivity Analysis Using Spreadsheets
Analyzing Cost-Reducing Projects
Projects with Different Lives
Ranking Mutually Exclusive Projects
Inflation and Capital Budgeting
Valuation Models
Principles of Asset Valuation
The Relation between an Asset's Value and Its Price
Value Maximization and Financial Decisions
The Law of One Price and Arbitrage
Arbitrage and the Prices of Financial Assets
Interest Rates and the Law of One Price
Exchange Rates and Triangular Arbitrage
Valuation Using Comparables
Valuation Models
Accounting Measures of Value
How Information Is Reflected in Security Prices
The Efficient Markets Hypothesis
Valuation of Known Cash Flows: Bonds
Using Present Value Formulas to Value Known Cash Flows
The Basic Building Blocks: Pure Discount Bonds
Coupon Bonds, Current Yield, and Yield to Maturity
Reading Bond Listings
Why Yields for the Same Maturity May Differ
The Behavior of Bond Prices over Time
Valuation of Common Stocks
Reading Stock Listings
The Discounted Dividend Model
Earnings and Investment Opportunities
A Reconsideration of the Price/Earnings Multiple Approach
Does Dividend Policy Affect Shareholder Wealth?
Risk Management and Portfolio Theory
An Overview of Risk Management
What Is Risk?
Risk and Economic Decisions
The Risk-Management Process
The Three Dimensions of Risk Transfer
Risk Transfer and Economic Efficiency
Institutions for Risk Management
Portfolio Theory: Quantitative Analysis for Optimal Risk Management
Probability Distributions of Returns
Standard Deviation as a Measure of Risk
Hedging, Insuring, and Diversifying
Using Forward and Futures Contracts to Hedge Risk
Hedging Foreign-Exchange Risk with Swap Contracts
Hedging Shortfall Risk by Matching Assets to Liabilities
Minimizing the Cost of Hedging
Insuring versus Hedging
Basic Features of Insurance Contracts
Financial Guarantees
Caps and Floors on Interest Rates
Options as Insurance
The Diversification Principle
Diversification and the Cost of Insurance
Choosing an Investment Portfolio
The Process of Personal Portfolio Selection
The Trade-Off between Expected Return and Risk
Efficient Diversification with Many Risky Assets
Asset Pricing
The Capital Asset Pricing Model
The Capital Asset Pricing Model in Brief
Determinants of the Risk Premium on the Market Portfolio
Beta and Risk Premiums on Individual Securities
Using the CAPM in Portfolio Selection
Valuation and Regulating Rates of Return
Modifications and Alternatives to the CAPM
Forward and Futures Prices
Distinctions between Forward and Futures Contracts
The Economic Function of Futures Markets
The Role of Speculators
Relation between Commodity Spot and Futures Prices
Extracting Information from Commodity Futures Prices
Forward-Spot Price Parity for Gold
Financial Futures
The "Implied" Riskless Rate
The Forward Price Is Not a Forecast of the Future Spot Price
Forward-Spot Price-Parity Relation with Cash Payouts
"Implied" Dividends
The Foreign-Exchange Parity Relation
The Role of Expectations in Determining Exchange Rates
Options and Contingent Claims
How Options Work
Investing with Options
The Put-Call Parity Relation
Volatility and Option Prices
Two-State (Binomial) Option Pricing
Dynamic Replication and the Binomial Model
The Black-Scholes Model
Implied Volatility
Contingent Claims Analysis of Corporate Debt and Equity
Credit Guarantees
Other Applications of Option-Pricing Methodology
Corporate Finance
Capital Structure
Internal versus External Financing
Equity Financing
Debt Financing
The Irrelevance of Capital Structure in a Frictionless Environment
Creating Value through Financing Decisions
Reducing Costs
Dealing with Conflicts of Interest
Creating New Opportunities for Stakeholders
Financing Decisions in Practice
How to Evaluate Levered Investments
Finance and Corporate Strategy
Mergers and Acquisitions
Investing in Real Options
Suggested Readings
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