Finance Basics
Finance basics are the general topics that make up the field of finance. Finance is the science of funds and asset management. Finance is about saving and lending (or borrowing) money. Finance also deals with the concepts of money, risk, and time, and how they are all interrelated.
The major topics of finance include:
The Time Value of Money
This concept is about the present value of money and the future value of money.
Annuities
This concept is about the present value of an annuity.
Perpetuities
This concept deals with the present value of a perpetuity.
Interest Rates
There are several types of interest rates including the Nominal Rate, Periodic Rate, and the Effective Annual Rate.
Probability Distribution
How to derive the Expected Rate of Return.
Standard Deviation
General statistical analysis.
CAPM
The Capital Asset Pricing Model and how it deals with risk and rate of return, then comparing the result to the risk and return of the overall stock market.
Bond Valuation
The more risky a bond is, the higher the interest rate, but the higher the chance of default by the borrower.
Stock Valuation
The different types of stocks (preferred and common) and the Constant Growth Formula.
Cost of Capital
How a firm raises money to build, expand, or take on a new project.
These are the general areas of finance.