,MM
1) Profit Maximization?
this goal ignores:
a) TIMING of Returns
(Time Value of Money)
b) UNCERTAINTY of Returns
(Risk)
Goal of the Firm
MARKET
Transferring Capital
◻ Direct Transfer of
Funds
Cash
firm
saver
Securities
Transferring Capital
◻ Indirect Transfer using Investment
Banker
Funds Funds
saver
investmen
t firm
banker
Securities Securities
Transferring Capital
◻ Indirect Transfer using a Financial
Intermediary
Funds Funds
saver financial
intermediar firm
y
Intermediar
y
Securities
Q: What are
SECURITIES?
A: Financial Assets that
Investors purchase hoping
to earn a high rate of
return.
Types of Securities
◻ Treasury Bills and Treasury Bonds
◻ Municipal Bonds
◻ Corporate Bonds
◻ Preferred Stocks
◻ Common Stocks