Basic Finance: Interest Rates, DiscountingDiscounting, Investments, Loans

Patrice Poncet () and Roland Portait
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Patrice Poncet: ESSEC Business School
Roland Portait: ESSEC Business School

Chapter 2 in Capital Market Finance, 2022, pp 39-92 from Springer

Abstract: Abstract Interest rates allow estimating the value today of future cash flows and defining and calculating the return on investment or the cost of financing. Some fundamental concepts such as financial leverage or the distinction between real and nominal cash flows and interest rates are also discussed. We first explain how to represent lending and borrowing and, more generally, investments and financing through cash flow sequences. We then present the various interest rates in use in the market and the different conventions they give rise to. We then discuss the methods of estimating present values and their applications to the analysis of investments, before studying the mechanics of long-term credits.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-030-84600-8_2

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DOI: 10.1007/978-3-030-84600-8_2

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