© 2000 John Petroff

In this chapter we start with an understanding of the nuts and bolts (i.e. basic elements) of finance, such as rate of return, interest rate and measure of risk that go into value formulas. Some of the theory underlying these elements is very well established; whereas other theory is relatively recent (e.g. less than 40 years for modern portfolio theory), yet it is widely accepted. The topic in this chapter are

A- General formula of value of financial assets
B- Defining future benefits from the ownership of financial assets.
C- Discounting (or time value of money)
D- General understanding of interest rates
E- Risk adjusted rate of return
F- Determining rates of return

G- Review of a few financial definitions and theorems

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Last modified: Jun/01/01

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