1. Copyright © 2004 South-Western 27 The Basic Tools of Finance Grundvallar verkfæri sem notuð eru í fjármálum

2. Copyright © 2004 South-Western Finance is the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk. Fjármál fjalla um hvernig fólk tekur ákvarðanir um tilfærslu/ráðstöfun auðlinda yfir tíma og meðhöndlun áhættu.

3. Copyright © 2004 South-Western PRESENT VALUE: MEASURING THE TIME VALUE OF MONEY Present value refers to the amount of money today that would be needed to produce, using prevailing interest rates, a given future amount of money. Núvirði vísar til þess peningamagns sem þyrfti í dag, byggt almennum vöxtum, til að skila tiltekinni upphæð í framtíðinni.

4. Copyright © 2004 South-Western PRESENT VALUE: MEASURING THE TIME VALUE OF MONEY Future Value FramtíðarvirðiFuture Value Framtíðarvirði The amount of money in the future that an amount of money today will yield, given prevailing interest rates (að gefnum almennu vaxtastigi), is called the future value.

5. Copyright © 2004 South-Western MANAGING RISK A person is said to be risk averse (áhættufælin persóna) if she exhibits a dislike of uncertainty (ef er á móti áhættu).

6. Copyright © 2004 South-Western MANAGING RISK Individuals can reduce risk choosing any of the following: Buy insurance Diversify Accept a lower return on their investments

7. Figure 1 Risk Aversion Wealth 0 Utility Current wealth $1,000 gain $1,000 loss Utility loss from losing $1,000 Utility gain from winning $1,000 Copyright©2004 South-Western

8. The Markets for Insurance insurance (ein leið til að glíma við áhættu er að kaupa tryggingu).One way to deal with risk is to buy insurance (ein leið til að glíma við áhættu er að kaupa tryggingu). The general feature of insurance contracts is that a person facing a risk pays a fee to an insurance company, which in return agrees to accept all or part of the risk. (Almennir eiginleikar tryggingasamninga eru þeir að aðilar greiði þóknun til tryggingafyrirtækis, sem í staðinn skuldbindur sig til að standa undir hluta eða allri ábyrgð sem áhættunni fylgir.)

9. Copyright © 2004 South-Western Diversification of Idiosyncratic Risk Diversification (Systematic risk) refers to the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks.

10. Copyright © 2004 South-Western Diversification of Idiosyncratic Risk Idiosyncratic risk (Unsystematic risk) is the risk that affects only a single person. The uncertainty associated with specific companies.

11. Copyright © 2004 South-Western Diversification of Idiosyncratic Risk Aggregate risk (Heildaráhætta) is the risk that affects all economic actors at once, the uncertainty associated with the entire economy. Diversification cannot remove aggregate risk. (Fjölþætting getur ekki eytt heimldaráhættu)

12. Figure 2 Diversification Number of Stocks in Portfolio 49 (More risk) (Less risk) 20 01468102040 Risk (standard deviation of portfolio return) Aggregate risk Idiosyncratic risk 30 Copyright©2004 South-Western

13. Diversification of Idiosyncratic Risk People can reduce risk by accepting a lower rate of return. Fólk getur dregið úr áhættu, með því að sætta sig við lægri ávöxtun.

14. Copyright © 2004 South-Western Efficient Markets Hypothesis The efficient markets hypothesis is the theory that asset prices reflect all publicly available information about the value of an asset. Tilgátan um skilvirkan markað felur í sér kenningu um að eignaverð endurspegli upplýsingar aðgengar almenningi um virði eigna.

15. Copyright © 2004 South-Western CASE STUDY: Random Walks and Index Funds Random walk refers to the path of a variable whose changes are impossible to predict. (Ráf / slembiganga, tengist markaðsskilvirkni og felur í sér leitni í breytu sem ómögulegt er að spá fyrir um.) If markets are efficient, all stocks are fairly valued and no stock is more likely to appreciate than another. Thus stock prices follow a random walk. (Sé markaður skilvirkur, þá eru öll hlutabréf verðlögð á sanngjarnan máta og engin þeirra líklegri til að verðfalla frekar en önnur).