1-1 The Finance Sector & Careers A Discussion The Financial Services Sector Career Opportunities Sub-groups within the sector Globalization Some search sites Pank Agrrawal, Ph.D. Astt. Prof. Finance

1-2 Why study finance? $’s facilitate transactions, but money itself can be transacted, what is its price? Why go to work? Why invest? Invest in what - education, health, stocks, bonds? All? Now? Local stocks, national stocks or global stocks? How? Where? Why not bonds?

1-3 Why ask why?… How do I value stocks/bonds? Go to or Look at what? If T-bond rates go up – T-Bonds do what? And the US $? Points on a mortgage sound good. Really? Should I borrow to start my business? At what rate?

1-4 Simple Complexities of Finance: 3 Questions If your initial investment declines by 50%, what percentage increase will bring you back to even? +50%, +49%, +51%, +100%, +200% If the average annual returns for the past two years has been –50% and +50%, what is the return on your investment over those two years? –1%, 0%, –25%, -75%, +11%,+25% If your investment has trebled in value, what is the associated percentage rise? (1% =1/100)

1-5 Finance sub-specializations Financial Intermediaries: Banking Corporate Finance: Managing the financing of corporations Investment Management: Portfolio Management

1-6 PA: 1998 gdp=$8.5T 2005 gdp=$12.5T 1T=10^12=10 00B= 1000*1000M PA: 1998 gdp=$8.5T 2005 gdp=$12.5T 1T=10^12=10 00B= 1000*1000M Finance as % of US GDP

1-7 Types of financial institutions Commercial banks - Citibank Investment banks – Goldman Sachs Mutual savings banks Credit unions – University CU Pension funds – Corporate PFs Life insurance companies – Met Life, NY Life Mutual funds – Fidelity, Vanguard, Schwab Hedge funds - Bridgewater, DE Shaw, Citadel

1-8 Hedge Funds $ 1.5 Trillion Sub-industry Historically the stock market value has been about 58% of GDP. Lows were in the range of 37% in the early 1950s, and 25% at the bottom of the Great Depression. Today the rate is around 100% ($13 Trillion) From: Wikipedia.com Citadel, Campbell

1-9 Finance Jobs

1-10 Financial Management Issues of the New Millennium The effect of changing technology: lower costs, efficient, barriers to entry lowered The globalization of investing – cointegration – EWA, EWT, IFN, EFA, SPY

1-11 EWO, EWT, IFN, EFA, SPY, EZA, GE

1-12 Relevance of Finance and Globalization: If you are a Doctor / Engineer– how does FM affect you? For self decisions – day to day Good business organization If you are a Nebraska Homebuilder– how does Globalization affect you? Local economy – wheat demand - global Interest rates –global- housing demand

1-13 USD vs EUR, INR

1-14 Percentage of Revenue and Net Income from Overseas Operations for 10 Well- Known Corporations Sears, Roebuck M Merck McDonald’s JP Morgan Chase & Co IBM General Motors General Electric Exxon Mobil Coca-Cola % of Net Income from overseas % of Revenue from overseas Company

1-15 Responsibility of the Finance Staff Maximize stock value by: Forecasting and planning Investment and financing decisions Coordination and control Transactions in the financial markets Managing risk

1-16 Decision making in Finance Decisions made by financial managers: Investment decisions [which project,where] Financing decisions (the relative use of debt vs equity financing) Policy decisions [retained earnings use, dividends, taxation] The external environment [ no control ] ceteris paribus – not a bus in paris