Author: Remi Malahieude Based on: Release FI-A2-engb 2/2008 (1003) – Steve Elliot's Finance Notes from Date: January 23, 2010 Finance Be aware that beyond the Past Papers, the Faculty Board will post some extremely valuable Revision Exercises in the Faculty Download Area. Those files are not there from the start of term. The Professor will post them right before the minor diet. I highly recommend doing all those prior to any online Case study or Past Paper. Good luck in your finance journey. Module 1 Finance is the economics of allocating resources across time. Financial Markets Participation is financial markets is driven in part by the desire to shift future resources to the present so as to increase personal consumption, and thus satisfaction. Or one may shift resources to the future by lending them, buying common stock, etc. In exchange, they get an expectation of increased future resources, in the form of interest, dividends, and/or capital gains. Where financial investments serve the purpose of reallocating the same resources across time, real asset investment can actually create new future resources. The provision of funds for real asset investment is important, as is the allocative information that financial markets provide to those interested in making real asset investment. Financial markets can help tell the investor whether a proposed investment is worthwhile by comparing the returns from the investment with those available on competing uses. Financial market participants are risk-averse, they would choose the less risky of two otherwise identical investments. Market Interest Rate & Prices The market interest rate is the rate of exchange between present and future resources. Always positive because lenders keep their money if they are not offered a positive return (MCQ1B1Q1) Determined by the supply and demand of resources to be borrowed and lent. At any given time there are numerous market interest rates covering different leng

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