Category: Finance

Finance is the study of how individuals, businesses, and organizations manage money and investments. Our resources provide expert insights into a range of financial topics, including personal finance, corporate finance, and financial markets. With our help, you can develop the skills and knowledge you need to make informed decisions about investing, budgeting, and managing your finances for long-term financial health.

Information Asymmetry

An economy is said to be characterized by information asymmetry when some parties to business transactions may have an information advantage over others. Types of information asymmetry The first is adverse selection. Adverse selection occurs because some persons, such as managers and other insiders know more about the current condition and future prospects of the … Continue reading Information Asymmetry

Bond Valuation — Calculation

Bonds can be purchased at any time. To value the bond, the procedures differ depending on whether the bond is purchased on the date interest is regularly paid (interest date) or whether it is purchased “between interest dates”. How to calculate the Purchase Price of a Bond on an Interest Date Formula to be used: … Continue reading Bond Valuation — Calculation

CAPM – Capital Asset Pricing Model

In an efficient securities market, prices of securities, such as stocks, always fully reflect all publicly available information. This raises the question “What should the price be?” The well-known Sharpe-Lintner capital asset pricing model (CAPM) provides an answer. According to the model a share’s current market price will be such that: Expected return on the … Continue reading CAPM – Capital Asset Pricing Model

Efficient Markets Hypothesis – Theory & Definition

Definition An efficient securities market is one where the prices of securities traded on that market at all times “properly reflect” all information that is publicly known about those securities. Noteworthy Points of the Theory First, market prices are efficient with respect to publicly known information. The possibility, therefore, of inside information is not ruled … Continue reading Efficient Markets Hypothesis – Theory & Definition

Calculating Compound Interest

Compound interest means that the interest will include interest calculated on interest. For example, if an amount of $5,000 is invested for two years and the interest rate is 10%, compounded yearly: • At the end of the first year the interest would be ($5,000 * 0.10) or $500 • In the second year the … Continue reading Calculating Compound Interest

Understanding Market Volatility

Volatility is a good thing Conventional, conservative investment advisors hold that your stock investments should be steady, and show gradual but reliable and predictable increases over time. And indeed, if you are building for retirement, these are the types of stocks to buy. There are however, two broad types of stock market investment strategies. The … Continue reading Understanding Market Volatility