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Intro to Financial Concepts in Python.md

Introduction to Financial Concepts in Python

Course Objectives

The Time Value of Money
Compound Interest
Discounting and Projecting Cash Flows Making Rational Economic Decisions Mortgage Structures
Interest and Equity
The Cost of Capital
Wealth Accumulation

Lecturer

Dakota Wixom, Quantitative Finance Analys

Lecture 1

  • Calculating Return on Investment (% Gain)
  • Calculating Return on Investment (Dollar Value)
  • Cumulative Growth (or Depreciation)
  • Compound Interest
  • Discount Factors
  • Cash flows are a series of gains or losses from an investment over time.
  • Discounting

Lecture 2

  • A Tale of Two Project Proposals
  • Common Profitability Analysis Methods
    • Net Present Value (NPV)
      • Equal to the sum of all discounted cash flows
      • Does not allow for the comparison of different sized projects or lengths
    • Internal Rate of Return (IRR)
      • Must be computed by solving for IRR in the NPV equation when set equal to 0
      • Can compare projects of different sizes and lengths but requires an algorithmic solution and does not measure total value
    • Equivalent Annual Annuity (EAA)
  • The Weighted Average Cost of Capital -- WACC = FEquity ∗ CEquity + FDebt ∗ CDebt ∗ (1 − TR)
  • Proportion of Financing
  • Discounting Using WACC
  • Comparing Two Projects of Different Life Spans
    • Different NPVs and IRRs

Lecture 3

  • Mortgage Basics -- a loan that covers the remaining cost of a home after paying a percentage of the home value as a down payment
  • Convert from an annual rate to a periodic rate
  • Mortgage Loan Payments
  • Amortization -- Principal (Equity), Interest Payment, Principal Payment
  • Ownership, Underwater Mortgage
  • Forecasting Cumulative Growth

Lecture 4

  • Budgeting Project Proposal -- take into account the following:
    • Rent
    • Food expenses Entertainment expenses Emergency fund
  • You will have to adjust for the following:
    • Taxes
    • Salary growth
    • Inflation (for all expenses)
  • Constant Cumulative Growth Forecast
  • Forecasting Values from Growth Rates
  • Net Worth and Valuation in Your Personal Financial Life
    • Net Worth = Assets - Liabilities = Equity
    • Valuation = NPV(discount rate, cash flows)
  • Reaching Financial Goals
  • The Basics of Investing
  • The Power of Time and Compound Interest
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