第三章金融市场和净现值

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1、McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-0Chapter Outline3.1 The Financial Market Economy3.2 Making Consumption Choices Over Time3.3 The Competitive Market3.4 The Basic Principle3.5 Practicing the Principle3.6 Illustrating the Investment Decision3.7 Co

2、rporate Investment Decision Making3.8 Summary and ConclusionsMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-13.1 The Financial Market Economy Individuals and institutions have different income streams and different intertemporal consumption preferences. Beca

3、use of this, a market has arisen for money. The price of money is the interest rate.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-2The Financial Market Economy: Example Consider a dentist who earns $200,000 per year and chooses to consume $80,000 per year.

4、He has $120,000 in surplus money to invest. He could loan $30,000 to each of 4 college seniors. They each promise to pay him back with interest after they graduate in one year.DentistStudent #1Student #2Student #3Student #4$30,000$30,000$30,000$30,000$30,000(1+r)$30,000(1+r)$30,000(1+r)$30,000(1+r)M

5、cGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-3The Financial Market Economy: Example Rather than performing the credit analysis 4 times, he could loan the whole $120,000 to a financial intermediary in return for a promise to repay the $120,000 in one year wi

6、th interest. The intermediary in turn loans $30,000 to each of the 4 college seniors. Student #1Student #2Student #3Student #4$30,000$30,000$30,000Bank$120,000Dentist$30,000$30,000(1+r)$30,000(1+r)$30,000(1+r)$30,000(1+r)$120,000(1+r)McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc.

7、 All rights reserved.3-4The Financial Market Economy: Example Financial intermediation can take three forms: Size intermediation In the example above, the bank took a large loan from the dentist and made small loans to the students. Term intermediation Commercial banks finance long-term mortgages wi

8、th short-term deposits. Risk intermediation Financial intermediaries can tailor the risk characteristics of securities for borrowers and lenders with different degrees of risk tolerance.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-5Market Clearing The job

9、of balancing the supply of and demand for loanable funds is taken by the money market. When the quantity supplied equals the quantity demanded, the market is in equilibrium at the equilibrium price. The price of money is the interest rate.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,

10、 Inc. All rights reserved.3-63.2 Making Consumption Choices over Time An individual can alter his consumption across time periods through borrowing and lending. We can illustrate this by graphing consumption today versus consumption in the future. This graph will show intertemporal consumption oppor

11、tunities.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-7Intertemporal Consumption Opportunity Set$0$20,000$40,000$60,000$80,000$100,000$120,000Consumption todayA person with $95,000 who faces a 10% interest rate has the following opportunity set.One choice

12、available is to consume $40,000 now; invest the remaining $55,000; consume $60,000 next year.1)10. 1 (000,55$000,60$0$20,000$40,000$60,000$80,000$100,000$120,000Consumption at t+1McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-8Intertemporal Consumption Oppor

13、tunity Set$0$20,000$40,000$60,000$80,000$100,000$120,000$0$20,000$40,000$60,000$80,000$100,000$120,000Consumption todayConsumption at t+1Another choice available is to consume $60,000 now; invest the remaining $35,000; consume $38,500 next year.1)10. 1 (000,35$500,38$McGraw-Hill/IrwinCopyright 2002

14、by The McGraw-Hill Companies, Inc. All rights reserved.3-9Taking Advantage of Our Opportunities$0$20,000$40,000$60,000$80,000$100,000$120,000$0$20,000$40,000$60,000$80,000$100,000$120,000Consumption todayConsumption at t+1A persons preferences will tend to decide where on the opportunity set they wi

15、ll choose to be.Ms. PatienceMs. ImpatienceMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-10Changing Our Opportunities$0$20,000$40,000$60,000$80,000$100,000$120,000$0$20,000$40,000$60,000$80,000$100,000$120,000Consumption todayConsumption at t+1A rise in inte

16、rest rates will make saving more attractive and borrowing less attractive.Consider an investor who has chosen to consume $40,000 now and to consume $60,000 next year.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-113.3 The Competitive Market In a competitive

17、 market: Trading is costless. Information about borrowing and lending is available There are many traders; no individual can move market prices. There can be only one equilibrium interest rate in a competitive marketotherwise arbitrage opportunities would arise.McGraw-Hill/IrwinCopyright 2002 by The

18、 McGraw-Hill Companies, Inc. All rights reserved.3-123.4 The Basic Principle The basic financial principle of investment decision making is this: An investment must be at least as desirable as the opportunities available in the financial markets.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Com

19、panies, Inc. All rights reserved.3-133.5 Practicing the Principle: A Lending ExampleConsider an investment opportunity that costs $50,000 this year an provides a certain cash flow of $54,000 next year.Is this a good deal?It depends on the interest rate available in the financial markets.The investme

20、nt has an 8% return, if the interest rate available elsewhere is less than this, invest here.Cash inflowsTimeCash outflows01-$50,000$54,000McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-143.6 Illustrating the Investment Decision Consider an investor who has

21、an initial endowment of income of $40,000 this year and $55,000 next year. Suppose that he faces a 10-percent interest rate and is offered the following investment.Cash inflowsTimeCash outflows01-$25,000$30,000McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-1

22、53.6 Illustrating the Investment Decision$0Consumption todayOur investor begins with the following opportunity set: endowment of $40,000 today, $55,000 next year and a 10% interest rate.One choice available is to consume $15,000 now; invest the remaining $25,000 in the financial markets at 10%; cons

23、ume $82,500 next year.$0$99,000Consumption at t+1$55,000$82,500$40,000$15,000$90,000McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-163.6 Illustrating the Investment Decision$0Consumption todayA better alternative would be to invest in the project instead of

24、the financial markets.He could consume $15,000 now; invest the remaining $25,000 in the project at 20%; consume $85,000 next year.$0$99,000Consumption at t+1$55,000$82,500$40,000$85,000$15,000$90,000With borrowing or lending in the financial markets, he can achieve any pattern of cash flows he wants

25、any of which is better than his original opportunities. McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-173.6 Illustrating the Investment Decision$0Consumption todayNote that we are better off in that we can command more consumption today or next year.$0$99,0

26、00Consumption at t+1$55,000$82,500$40,000$85,000$15,000$101,500$101,500 = $15,000(1.10) + $85,000$92,273 = $15,000 + $85,000(1.10) $90,000 $92,273McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-18Net Present Value We can calculate how much better off in today

27、s dollar the investment makes us by calculating the Net Present Value:.Cash inflowsTimeCash outflows01-$25,000$30,00073.272, 2$10. 1000,30$000,25NPVMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-193.7 Corporate Investment Decision Making Shareholders will be

28、 united in their preference for the firm to undertake positive net present value decisions, regardless of their personal intertemporal consumption preferences.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-20Corporate Investment Decision MakingConsumption to

29、dayConsumption at t+1Positive NPV projects shift the shareholders opportunity set out, which is unambiguously good.All shareholders agree on their preference for positive NPV projects, whether they are borrowers or lenders.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights

30、 reserved.3-213.7 Corporate Investment Decision Making In reality, shareholders do not vote on every investment decision faced by a firm and the managers of firms need decision rules to operate by. All shareholders of a firm will be made better off if managers follow the NPV ruleundertake positive N

31、PV projects and reject negative NPV projects. McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-22The Separation Theorem The separation theorem in financial markets says that all investors will want to accept or reject the same investment projects by using the

32、NPV rule, regardless of their personal preferences. Logistically, separating investment decision making from the shareholders is a basic requirement of the modern corporation.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.3-233.8 Summary and Conclusions Financ

33、ial markets exist because people want to adjust their consumption over time. They do this by borrowing or lending. An investment should be rejected if a superior alternative exists in the financial markets. If no superior alternative exists in the financial markets, an investment has a positive net present value.