FIL 240 1st Edition Lecture 2 Outline of Last Lecture I What is Finance A Definition of economics B Definition of dynamic efficiency II Financial Intermediation A Definition of opportunity cost Outline of Current Lecture I Areas of Finance A Definition of REIT II Interest Rates A Equation for risk free rate and interest rate III Markets A Definition of money market B Definition of capital market C Definition of capital paper IV Liquidity Current Lecture I 4 large areas of finance and a subset o o o o o Investments Stockbroker investment banker hedge fund manager Corporate Finance Analyze potential projects how to invest Institutional Finance Banking etc Financial Planning Helping people groups prepare for the future Real Estate Finance specialized subset Analyze properties and see if they re worth buying A REIT real estate investment trust group of shareholders that buys malls strip malls etc and gives 95 of money back to shareholders Recently they ve started buying timber prisons and mines II Interest Rates rental rate of money of what you owe charged as a rental fee Underneath all rates are a core interest rate represents just the opportunity cost of money The Real Interest Rate These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute A Kreal driven by the supply of demand for money Kf Kreal e expectation rate all that matters Kf risk free rate short term Treasury bill K Kf risk premium III Markets A Money Market money for short term less than 1 year B Capital Market money for long term over 1 year C Commercial Paper debt instrument in money market 90 days issued by corps IV Liquidity efficiency ease with which an asset can be converted into cash another asset
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