Finance Fundamentals

What are bonds, what are its characteristics, and how do we find their prices?
Introduction to the bond valuation formula, an application of annuities and loans, as well as calculating the periodic coupon payments.

When do bonds sell at par value, at a discount, or at a premium? How does the relationship between a bond’s coupon rate and market’s interest rate affect the price of a bond? What is the yield to maturity (YTM) of a bond, and what its key assumptions?

What is the interest rate risk of bonds? Calculating how bonds with different maturity dates and different coupon rates respond differently (ie have different sensitivities) to the same change in the market interest rate.

What is the default risk of bonds? How does default risk affect a bond’s return? Introduction to the Term Structure that plots the total return of a bond against its time until maturity.

When will a bond’s actual or realized returns differ from its expected returns or its yield to maturity (YTM)? Introduction to the realized rate of return (RoR) of a bond, where it comes from, how it’s calculated, and how it can be annualized.

What is inflation, and how can it be reflected in interest rates? Introduction to nominal interest rates, real interest rates, and how they are different. Using the Fisher Equation to convert between nominal interest rates and real interest rates.

What are stocks, what are its characteristics, and how do we find their prices? Theoretical introduction to what stocks are, how they are different than bonds, and the different types of stocks.

How do you price stocks? Calculating the present value or the price of zero-growth stocks (ie stocks with constant dividends) by using the perpetuity formula.

How do you price stocks? Calculating the present value or the price of constant growth stocks (ie stocks with constantly growing dividends) by using the Gordon Growth Model.

How do you price stocks? Calculating the present value or the price of supernormal growth stocks (ie stocks that experience stages of growth with different growth rates) by using the Multistage Growth Model.

How do you price stocks? Deriving the ex and cum dividend formulas of the Gordon Growth Model, which are used to calculate the present value or the price of constant growth stocks (ie stocks with constantly growing dividends).

What information is reflected in the market price of a security? In this video, we explore three different hypotheses regarding market efficiency: weak-form efficiency, semi-strong form efficiency, and strong form efficiency. We discuss the implications of these hypothesis on which activities will earn us a return above the market without needing to take on additional risk. Can investors profit from technical analysis? How about fundamental analysis, or insider trading?