Microsoft PowerPoint - PoF.ppt

Pricingƒ 13

What determines the

price

at which investors are willing to

trade?

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Expectations about future cash flows

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Timing of these cash flows

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Riskiness of these cash flows

Ā

Present value of future CFs

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Valuation axioms

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Investors prefer more to less

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Investors are risk averse

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Money has a time value

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Investors are rational

Introduction to financial markets