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Understanding the Three Financial Statements

A robust understanding the three financial statements is important for banking and asset management interviews. This post is meant to be a quick review for an interview, or a complement to your introduction to financial accounting course, which covers this material in much greater detail. The three financial statements that all

Understanding the Yield Curve

What is Yield? Yield (also called Yield To Maturity, or YTM) is the return investors receive for holding a bond. Yield takes account of both the interest/coupons investors get and the bond price relative to its par value. What are Treasuries? US Treasuries are debt instruments the US Department of the Treasury issues

Central Banks and Monetary Policy: The Federal Reserve

In our previous post, we discussed the importance of interest rates in finance. We also introduced central banks by discussing the role it plays in influencing interest rates. We will go deeper into the function of central banks in this article, discussing their mandates and how they carry out their

CAPM – Capital Asset Pricing Model

We talked extensively about valuing a stream of cash flows in the previous articles. By building on the idea of present value, we can use it to value more complex investments like stocks. We start our section on valuation with CAPM. The article covers several basic concepts in statistics. If you

Inflation and Interest

In the Net Present Value and Annuities/Perpetuities articles, we spent a lot of time talking about valuing a stream of cash flows. We presented you with formulas and shortcuts that discounted future cash by the appropriate discount rate r. We treated r as a constant in our examples – something

Annuities and Perpetuities

Annuities and perpetuities are financial products where the purchaser of the product receives a stream of future cash flows. Calculating the present value of annuities and perpetuities can be done with the PV formula described in the NPV article, but that can become cumbersome as complexity increases. The formulas introduced

Net Present Value

What is Net Present Value? In short, Net Present Value, or NPV is a method used to calculate the value of something. Typically used by managers for capital budgeting, NPV can also be used in a variety of other circumstances, like deciding between two schools for your MBA. The formula for

Understanding Supply and Demand

Economics plays a fundamental role of business and finance, and supply and demand underpin all the topics within economics. Understanding how people, firms, and other institutions make decisions is critical to any sell side or buy side role. Understanding Demand Demand refers to the amount of goods or services desired at different