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Про книгу

A First Course in Finance является первым такого рода пособием, с простым и кратким подходом к изложению основ финансового курса в доступных терминах. В нем использованы простые числовые примеры для пояснения всех основных финансовых концепций (и формул).

Текст может быть использован в качестве полного курса, или как дополнение к традиционным учебникам по финансам.

Первые отзывы студентов были очень положительны в обоих случаях.

Несмотря на то, что это пособие подходит для самообучения, первоначальная цель его разработки была дополнить обучение в классах начального высшего образования и аспирантуры. Автор рассчитывал втиснуть материал в размер "напряженного" семестра или более размеренных 2-х семестров.

Содержание:

I. Investments and Returns

Chapter 1: A Short Introduction

1•1 The Goal of Finance: Relative Valuation

1•2 How do CFOs do It?

1•3 Learning How to Approach New Problems

1•4 The Main Parts of This Book

Chapter 2: The Time Value of Money

2•1 Basic Definitions

2•1.A. Investments, Projects, and Firms

2•1.B. Loans and Bonds

2•1.C. U.S. Treasuries

2•2 Returns, Net Returns, and Rates of Return

2•3 The Time Value of Money

2•3.A. The Future Value of Money

2•3.B. Compounding

2•3.C. Confusion: Interest Rates vs. Interest Quotes

2•4 Capital Budgeting

2•4.A. Discount Factor and Present Value (PV)

2•4.B. Net Present Value (NPV)

2•5 Summary

Chapter 3: More Time Value of Money

3•1 Separating Investment Decisions and Present Values From Other Considerations

3•1.A. Does It Matter When You Need Cash?

3•1.B. Corporate Valuation: Growth as Investment Criteria?

3•1.C. The Value Today is just “All Inflows” or just “All Outflows”

3•2 Perpetuities

3•2.A. The Simple Perpetuity Formula

3•2.B. The Growing Perpetuity Formula

3•2.C. A Growing Perpetuity Application: Individual Stock Valuation with Gordon Growth Models

3•3 The Annuity Formula

3•3.A. An Annuity Application: Fixed-Rate Mortgage Payments

3•3.B. An Annuity Example: A Level-Coupon Bond

3•3.C. The Special Cash Flow Streams Summarized

3•4 Summary

a Advanced Appendix: Proofs of Perpetuity and Annuity Formulas

Chapter 4: Investment Horizon, The Yield Curve, and (Treasury) Bonds

4•1 Time-Varying Rates of Return

4•2 Annualized Rates of Return

4•3 The Yield Curve

4•3.A. An Example: The Yield Curve in May 2002

4•3.B. Compounding With The Yield Curve

4•3.C. Yield Curve Shapes

4•4 Present Values With Time-Varying Interest Rates

4•4.A. Valuing A Coupon Bond With A Particular Yield Curve

4•5 Why is the Yield Curve not Flat?

4•5.A. The Effect of Interest Rate Changes on Short-Term and Long-Term Treasury Bond Values

4•6 The Yield To Maturity (YTM)

4•7 Optional Bond Topics

4•7.A. Extracting Forward Interest Rates

4•7.B. Shorting and Locking in Forward Interest Rates

4•7.C. Bond Duration

4•7.D. Continuous Compounding

4•8 Summary

Chapter 5: Uncertainty, Default, and Risk 83

5•1 An Introduction to Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

5•1.A. Random Variables and Expected Values 84

5•1.B. Risk Neutrality (and Risk Aversion Preview) 87

5•2 Interest Rates and Credit Risk (Default Risk) . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

5•2.A. Risk-Neutral Investors Demand Higher Promised Rates 88

5•2.B. A More Elaborate Example With Probability Ranges 89

5•2.C. Preview: Risk-Averse Investors Have Demanded Higher Expected Rates 91

5•3 Uncertainty in Capital Budgeting, Debt, and Equity . . . . . . . . . . . . . . . . . . . . . . . 93

5•3.A. Present Value With State-Contingent Payoff Tables 93

5•3.B. Splitting Project Payoffs into Debt and Equity 96

5•4 Robustness: How Bad are Your Mistakes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

5•4.A. Short-Term Projects 104

5•4.B. Long-Term Projects 104

5•4.C. Two Wrongs Do Not Make One Right 105

5•5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Chapter 6: Dealing With Imperfect Markets 111

6•1 Causes and Consequences of Imperfect Markets . . . . . . . . . . . . . . . . . . . . . . . . . 112

6•1.A. Perfect Market Assumptions 112

6•1.B. Value in Imperfect Markets 113

6•1.C. Perfect, Competitive, and Efficient Markets 113

6•2 The Effect of Disagreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

6•2.A. Expected Return Differences vs. Promised Return Differences 117

6•2.B. Corporate Finance vs. Entrepreneurial or Personal Finance? 118

6•2.C. Covenants, Collateral, and Credit Rating Agencies 119

6•3 Market Depth and Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

6•3.A. Typical Costs When Trading Real Goods—Houses 123

6•3.B. Typical Costs When Trading Financial Goods—Stocks 124

6•3.C. Transaction Costs in Returns and Net Present Values 126

6•3.D. Liquidity 127

6•4 An Introduction to The Tax Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

6•4.A. The Basics of (Federal) Income Taxes 128

6•4.B. Before-Tax vs. After-Tax Expenses 130

6•4.C. Average and Marginal Tax Rates 131

6•4.D. Dividend and Capital Gains Taxes 131

6•4.E. Other Taxes 132

6•4.F. What You Need To Know About Tax Principles In Our Book 133

6•5 Working With Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

6•5.A. Taxes in Rates of Returns 134

6•5.B. Tax-Exempt Bonds and the Marginal Investor 134

6•5.C. Taxes in NPV 135

6•5.D. Tax Timing 137

6•6 Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

6•6.A. Defining the Inflation Rate 138

6•6.B. Real and Nominal Interest Rates 139

6•6.C. Handling Inflation in Net Present Value 141

6•6.D. Interest Rates and Inflation Expectations 142

6•7 Multiple Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

6•7.A. How to Work Problems You Have Not Encountered 144

6•7.B. Taxes on Nominal Returns? 145

6•8 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Chapter 7: Capital Budgeting (NPV) Applications and Advice 153

7•1 The Economics of Project Interactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

7•1.A. The Ultimate Project Selection Rule 154

7•1.B. Project Pairs and Externalities 155

7•1.C. One More Project: Marginal Rather Than Average Contribution 157

7•2 Comparing Projects With Different Lives and Rental Equivalents . . . . . . . . . . . . . . . 162

7•3 Expected, Typical, and Most Likely Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

7•4 Future Contingencies and Real Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

7•4.A. A Basic Introduction 165

7•4.B. More Complex Option Valuation in a Risk-Neutral World 166

7•4.C. Decision Trees: One Set of Parameters 166

7•4.D. Decision Trees: One Set of Parameters 171

7•4.E. Summary 173

7•5 Mental Biases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

7•6 Incentive (Agency) Biases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

7•7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

Chapter 8: Other Important Capital Budgeting Topics 183

8•1 Profitability Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

8•2 The Internal Rate of Return (IRR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

8•2.A. Definition 185

8•2.B. Problems with IRR 187

8•3 So Many Returns: The Internal Rate of Return, the Cost of Capital, the Hurdle Rate, and

the Expected Rate of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

8•4 Other Capital Budgeting Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

8•4.A. The Problems of Payback 189

8•4.B. More Rules 190

8•5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

II. Corporate Financials 193

Chapter 9: Understanding Financial Statements 197

9•1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

9•1.A. The Contents of Financials 199

9•1.B. PepsiCo’s 2001 Financials 205

9•1.C. Why Finance and Accounting Think Differently 206

9•2 The Bottom-Up Example — Long-Term Accruals (Depreciation) . . . . . . . . . . . . . . . 208

9•2.A. Doing Accounting 208

9•2.B. Doing Finance 211

9•2.C. Translating Accounting into Finance 212

9•3 The Hypothetical Bottom-Up Example — Short-Term Accruals . . . . . . . . . . . . . . . . 215

9•3.A. Working Capital 215

9•3.B. Earnings Management 218

9•4 Completing the Picture: PepsiCo’s Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

9•5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

A Appendix: Supplementary Financials — Coca Cola . . . . . . . . . . . . . . . . . . . . . . . 225

a. Coca Cola’s Financials From EdgarScan 226

b. Coca Cola’s Financials From Yahoo!Finance 227

B Appendix: Abbreviated PepsiCo Income Statement and Cash Flow Statement . . . . . . . 228

Chapter 10: Valuation From Comparables 233

10•1 Comparables vs. NPV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

10•2 The Price-Earnings (PE) Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235

10•2.A. Definition 235

10•2.B. Why P/E Ratios differ 236

10•2.C. P/E Ratio Application Example: Valuing Beverage Companies 244

10•3 Problems With P/E Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245

10•3.A. Selection of Comparison Firms 246

10•3.B. (Non-) Aggregation of Comparables 247

10•3.C. A Major Blunder: Never Average P/E ratios 248

10•3.D. Computing Trailing Twelve Month (TTM) Figures 250

10•3.E. Leverage Adjustments For P/E Ratios 251

10•4 Other Financial Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255

10•4.A. Value-Based Ratios 255

10•4.B. Non-Value-Based Ratios Used in Corporate Analyses 257

10•5 Closing Thoughts: Comparables or NPV? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262

10•6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262

A Advanced Appendix: A Formula For Unlevering P/E ratios . . . . . . . . . . . . . . . . . . . 263
III. Risk and Investments 267

Chapter 11: A First Look at Investments 271

11•1 Stocks, Bonds, and Cash, 1970–2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272

11•1.A. Graphical Representation of Historical Stock Market Returns 272

11•1.B. Comparative Investment Performance 276

11•1.C. Comovement, Beta, and Correlation 280

11•2 Visible and General Historical Stock Regularities . . . . . . . . . . . . . . . . . . . . . . . . 282

11•3 History or Opportunities? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283

11•4 Eggs and Baskets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

11•4.A. The Overall Basket 284

11•4.B. The Marginal Risk Contribution 285

11•4.C. The Market Equilibrium 285

11•5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

Chapter 12: Securities and Portfolios 287

12•1 Some Background Information About Equities Market Microstructure . . . . . . . . . . . 288

12•1.A. Brokers 288

12•1.B. Exchanges and Non-Exchanges 288

12•1.C. How Securities Appear and Disappear 289

12•2 Equities Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291

12•2.A. Going Long 291

12•2.B. Going Short: The Academic Fiction 291

12•2.C. Going Short: The Real World 292

12•3 Portfolios and Indexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

12•3.A. Portfolio Returns 294

12•3.B. Funds and Net Holdings 296

12•3.C. Some Common Indexes 297

12•3.D. Equal-Weighted and Value-Weighted Portfolios 298

12•3.E. Quo Vadis? Random Returns on Portfolios 301

12•4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302

Chapter 13: Statistics 305

13•1 Historical and Future Rates of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

13•2 The Data: Twelve Annual Rates of Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

13•3 Univariate Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308

13•3.A. The Mean 308

13•3.B. The Variance and Standard Deviation 308

13•4 Bivariate Statistics: Covariation Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311

13•4.A. Intuitive Covariation 311

13•4.B. Covariation: Covariance, Correlation, and Beta 312

13•4.C. Computing Covariation Statistics For The Annual Returns Data 320

13•5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

13•6 Advanced Appendix: More Statistical Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . 324

13•6.A. Historical and Future Statistics 324

13•6.B. Improving Future Estimates From Historical Estimates 324

13•6.C. Other Measures of Spread 326

13•6.D. Translating Mean and Variance Statistics Into Probabilities 326

13•6.E. Correlation and Causation 327

Chapter 14: Statistics of Portfolios 329

14•1 Two Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331

14•1.A. Expected Rates of Returns 331

14•1.B. Covariance 332

14•1.C. Beta 333

14•1.D. Variance 334

14•2 Three and More Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336

14•2.A. Expected Returns, Covariance, Beta 336

14•2.B. Variance 338

14•2.C. Advanced Nerd Section: Variance with N Securities and Double Summations 340

14•2.D. Another Variance Example: PepsiCo, CocaCola, and Cadbury 342

14•3 Historical Statistics For Some Asset-Class Index Portfolios . . . . . . . . . . . . . . . . . . 345

14•4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349

A Appendix: More Historical Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

a. Country Fund Rates of Return 352

b. Dow-Jones Constituents 353

Chapter 15: The Principle of Diversification 357

15•1 What Should You Care About? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358

15•2 Diversification: The Informal Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359

15•3 Diversification: The Formal Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360

15•3.A. Uncorrelated Securities 360

15•3.B. Correlated Securities 363

15•3.C. Measures of Contribution Diversification: Covariance, Correlation, or Beta? 363

15•4 Does Diversification Work in the Real World? . . . . . . . . . . . . . . . . . . . . . . . . . . 368

15•4.A. Diversification Among The Dow-Jones 30 Stocks 368

15•4.B. Mutual Funds 370

15•4.C. Alternative Assets 370

15•5 Diversification Over Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372

15•6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376

Chapter 16: The Efficient Frontier—Optimally Diversified Portfolios 381

16•1 The Mean-Variance Efficient Frontier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382

16•1.A. The Mean-Variance Efficient Frontier With Two Risky Securities 382

16•1.B. Different Covariance Scenarios 385

16•1.C. The Mean-Variance Efficient Frontier With Many Risky Securities 386

16•2 Real-World Mean-Variance Efficient Frontier Implementation Problems . . . . . . . . . . . 392

16•3 Combinations of Portfolios on The Efficient Frontier . . . . . . . . . . . . . . . . . . . . . . 394

16•4 The Mean-Variance Efficient Frontier With A Risk-Free Security . . . . . . . . . . . . . . . 397

16•4.A. Risk-Reward Combinations of Any Portfolio Plus the Risk-Free Asset 397

16•4.B. The Best Risk-Reward Combinations With A Risk-Free Asset 399

16•4.C. The Formula to Determine the Tangency Portfolio 400

16•4.D. Combining The Risk-Free Security And the Tangency Portfolio 402

16•5 What does a Security need to offer to be in an Efficient Frontier Portfolio? . . . . . . . . 403

16•5.A. What if the Risk-Reward Relationship is Non-Linear? 403

16•5.B. What if the Risk-Reward Relationships is Linear? 404

16•5.C. The Line Parameters 406

16•6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409

A Advanced Appendix: Excessive Proofs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411

a. The Optimal Portfolio Weights Formula 411

b. The Combination of MVE Portfolios is MVE — With Risk-Free Security. 412

c. The Combination of Mean-Variance Efficient Portfolios is Mean-Variance Efficient — Without Risk-Free Security. 413

d. Proof of the Linear Beta vs. Expected Rate of Return Relationship for MVE Frontier Portfolios 413

Chapter 17: The CAPM: A Cookbook Recipe Approach 421

17•1 The Opportunity Cost of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422

17•2 The CAPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423

17•2.A. The Premise and Formula 423

17•2.B. The Security Ma