Finance \u2013 University Level \u2013 Pak Notes Hub<\/title>\r\n <link href=\"https:\/\/fonts.googleapis.com\/css2?family=Inter:wght@400;500;600;700&family=Fira+Code:wght@400;500&display=swap\" rel=\"stylesheet\"\/>\r\n <style>\r\n *, *::before, *::after { box-sizing: border-box; margin: 0; padding: 0; }\r\n :root {\r\n --green: #1a7a4a; --green-dark: #145f38; --green-light: #e8f5ee;\r\n --teal: #17a589; --accent: #f0b127; --dark: #1c2833; --mid: #566573;\r\n --light: #f4f6f7; --code-bg: #f0f4f8; --code-border: #2e86c1;\r\n --note-bg: #fef9e7; --note-border: #f0b127; --white: #ffffff;\r\n --radius: 10px; --shadow: 0 4px 24px rgba(26,122,74,.10);\r\n }\r\n html { scroll-behavior: smooth; }\r\n body { font-family: 'Inter', sans-serif; background: #f2f6f3; color: var(--dark); line-height: 1.7; font-size: 15px; }\r\n\r\n \/* NAV *\/\r\n nav { position: sticky; top: 0; z-index: 100; background: var(--green-dark); padding: 0 2rem; display: flex; align-items: center; justify-content: space-between; 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} nav .nav-links { display: none; } }\r\n <\/style>\r\n<\/head>\r\n<body>\r\n\r\n<div class=\"progress-bar\" id=\"progress\"><\/div>\r\n\r\n<nav>\r\n <div class=\"nav-brand\">Pak <span>Notes Hub<\/span><\/div>\r\n <div class=\"nav-links\">\r\n <a href=\"#unit-1\">Basics<\/a>\r\n <a href=\"#unit-5\">Investment<\/a>\r\n <a href=\"#unit-9\">Markets<\/a>\r\n <\/div>\r\n<\/nav>\r\n\r\n<section class=\"hero\">\r\n <div class=\"hero-tag\">\ud83d\udcb0 University Level \u2014 BS Commerce \/ BBA<\/div>\r\n <h1>Finance<br\/><span>Complete Notes<\/span><\/h1>\r\n <p>Time Value of Money \u00b7 Stocks \u00b7 Bonds \u00b7 Capital Budgeting \u00b7 Investment Decisions \u00b7 All in Easy Urdu\/English<\/p>\r\n <div class=\"hero-pills\">\r\n <div class=\"pill\">TVM Concepts<\/div>\r\n <div class=\"pill\">Securities<\/div>\r\n <div class=\"pill\">Capital Structure<\/div>\r\n <\/div>\r\n<\/section>\r\n\r\n<div class=\"page-wrap\">\r\n\r\n \r\n <aside class=\"sidebar\">\r\n <div class=\"sidebar-title\">\ud83d\udcda Table of Contents<\/div>\r\n <ul class=\"toc-list\">\r\n <li><a href=\"#unit-1\"><span class=\"toc-num\">1<\/span> Basics<\/a><\/li>\r\n <li><a href=\"#unit-2\"><span class=\"toc-num\">2<\/span> Time Value<\/a><\/li>\r\n <li><a href=\"#unit-3\"><span class=\"toc-num\">3<\/span> Annuities<\/a><\/li>\r\n <li><a href=\"#unit-4\"><span class=\"toc-num\">4<\/span> Bonds<\/a><\/li>\r\n <li><a href=\"#unit-5\"><span class=\"toc-num\">5<\/span> Stocks<\/a><\/li>\r\n <li><a href=\"#unit-6\"><span class=\"toc-num\">6<\/span> Capital Budgeting<\/a><\/li>\r\n <li><a href=\"#unit-7\"><span class=\"toc-num\">7<\/span> Risk & Return<\/a><\/li>\r\n <li><a href=\"#unit-8\"><span class=\"toc-num\">8<\/span> Capital Structure<\/a><\/li>\r\n <li><a href=\"#unit-9\"><span class=\"toc-num\">9<\/span> Financial Markets<\/a><\/li>\r\n <li><a href=\"#unit-10\"><span class=\"toc-num\">10<\/span> Portfolio<\/a><\/li>\r\n <\/ul>\r\n <\/aside>\r\n\r\n <main>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-1\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 1<\/div>\r\n <h2>Finance Basics<\/h2>\r\n <p>Introduction to Financial Management<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>What is Finance?<\/h3>\r\n <p><strong>Finance<\/strong> is the management of money and investments. Studies how businesses raise capital and invest it to maximize shareholder value.<\/p>\r\n\r\n <h3>Goals of Financial Management<\/h3>\r\n <ul>\r\n <li><strong>Maximize shareholder wealth:<\/strong> Increase stock price<\/li>\r\n <li><strong>Maximize profit:<\/strong> Generate highest returns<\/li>\r\n <li><strong>Ensure liquidity:<\/strong> Ability to pay short-term obligations<\/li>\r\n <li><strong>Sustainable growth:<\/strong> Long-term value creation<\/li>\r\n <li><strong>Manage risk:<\/strong> Balance safety with returns<\/li>\r\n <\/ul>\r\n\r\n <h3>Functions of Financial Manager<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Function<\/th><th>Activity<\/th><th>Goal<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Planning<\/td><td>Budget, forecast<\/td><td>Allocate resources efficiently<\/td><\/tr>\r\n <tr><td>Investment<\/td><td>Capital budgeting<\/td><td>Select profitable projects<\/td><\/tr>\r\n <tr><td>Financing<\/td><td>Raise capital<\/td><td>Minimize cost of capital<\/td><\/tr>\r\n <tr><td>Dividend<\/td><td>Distribute earnings<\/td><td>Balance growth and returns<\/td><\/tr>\r\n <tr><td>Working Capital<\/td><td>Manage liquidity<\/td><td>Ensure smooth operations<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Areas of Finance<\/h3>\r\n <ul>\r\n <li><strong>Corporate Finance:<\/strong> Decisions within business<\/li>\r\n <li><strong>Personal Finance:<\/strong> Individual wealth management<\/li>\r\n <li><strong>Public Finance:<\/strong> Government fiscal policy<\/li>\r\n <li><strong>International Finance:<\/strong> Cross-border transactions<\/li>\r\n <\/ul>\r\n\r\n <div class=\"info-box\">\ud83d\udca1 <strong>Financial Goal:<\/strong> Maximize shareholder value while maintaining financial stability and ethical practices.<\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> List decisions a finance manager makes daily<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-2\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 2<\/div>\r\n <h2>Time Value of Money (TVM)<\/h2>\r\n <p>A Rupee Today is Worth More Than Tomorrow<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Concept of TVM<\/h3>\r\n <p><strong>Time Value of Money<\/strong> means money available today is worth more than the same amount in the future because you can invest it and earn returns.<\/p>\r\n\r\n <h3>Why TVM Matters?<\/h3>\r\n <ul>\r\n <li>You can earn interest on money invested today<\/li>\r\n <li>Inflation reduces purchasing power<\/li>\r\n <li>Opportunity cost of capital<\/li>\r\n <li>Risk: Future is uncertain<\/li>\r\n <\/ul>\r\n\r\n <h3>Simple Interest vs Compound Interest<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Factor<\/th><th>Simple Interest<\/th><th>Compound Interest<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Formula<\/td><td>I = P \u00d7 r \u00d7 t<\/td><td>A = P(1+r)^t<\/td><\/tr>\r\n <tr><td>Interest On<\/td><td>Principal only<\/td><td>Principal + accumulated interest<\/td><\/tr>\r\n <tr><td>Growth<\/td><td>Linear<\/td><td>Exponential<\/td><\/tr>\r\n <tr><td>Use<\/td><td>Short-term loans<\/td><td>Long-term investments<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Key Formulas<\/h3>\r\n <div class=\"code-block\"><pre>Present Value (PV): What is it worth today?\r\nPV = FV \/ (1 + r)^n\r\n\r\nFuture Value (FV): What will it be worth tomorrow?\r\nFV = PV \u00d7 (1 + r)^n\r\n\r\nWhere:\r\nPV = Present Value\r\nFV = Future Value\r\nr = Interest rate per period\r\nn = Number of periods<\/pre><\/div>\r\n\r\n <h3>Practical Example<\/h3>\r\n <div class=\"code-block\"><pre>If I invest Rs. 10,000 today at 10% annual interest:\r\n- After 1 year: FV = 10,000 \u00d7 (1.10)^1 = 11,000\r\n- After 5 years: FV = 10,000 \u00d7 (1.10)^5 = 16,105.10\r\n\r\nIf I receive Rs. 20,000 after 5 years, worth in today's rupees?\r\nPV = 20,000 \/ (1.10)^5 = 20,000 \/ 1.6105 = 12,418.64<\/pre><\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate PV and FV for various scenarios<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-3\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 3<\/div>\r\n <h2>Annuities & Perpetuities<\/h2>\r\n <p>Series of Equal Payments<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Annuity Definition<\/h3>\r\n <p><strong>Annuity<\/strong> is series of equal cash flows occurring at equal intervals. Examples: salaries, loan payments, insurance premiums.<\/p>\r\n\r\n <h3>Types of Annuities<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Type<\/th><th>Payment Timing<\/th><th>Use<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Ordinary Annuity<\/td><td>End of period<\/td><td>Most common<\/td><\/tr>\r\n <tr><td>Annuity Due<\/td><td>Beginning of period<\/td><td>Lease payments<\/td><\/tr>\r\n <tr><td>Perpetuity<\/td><td>Forever equal payments<\/td><td>Preference dividends<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Annuity Formulas<\/h3>\r\n <div class=\"code-block\"><pre>Future Value of Ordinary Annuity:\r\nFVA = PMT \u00d7 [((1 + r)^n - 1) \/ r]\r\n\r\nPresent Value of Ordinary Annuity:\r\nPVA = PMT \u00d7 [1 - (1 + r)^-n] \/ r\r\n\r\nPerpetuity (forever):\r\nPV = PMT \/ r\r\n\r\nWhere:\r\nPMT = Periodic payment\r\nr = Interest rate\r\nn = Number of periods<\/pre><\/div>\r\n\r\n <h3>Practical Example<\/h3>\r\n <div class=\"code-block\"><pre>You save Rs. 5,000 per year for 10 years at 8% interest.\r\nFV = 5,000 \u00d7 [((1.08)^10 - 1) \/ 0.08]\r\n = 5,000 \u00d7 14.4866\r\n = Rs. 72,433.09\r\n\r\nPreferred dividends of Rs. 10,000 forever at 5% discount:\r\nPV = 10,000 \/ 0.05 = Rs. 200,000<\/pre><\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate FV and PV of annuities<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-4\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 4<\/div>\r\n <h2>Bonds & Debt Valuation<\/h2>\r\n <p>Understanding Fixed Income Securities<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Bond Basics<\/h3>\r\n <p><strong>Bond<\/strong> is a debt security where investor lends money to issuer. Issuer pays periodic interest (coupon) and returns principal at maturity.<\/p>\r\n\r\n <h3>Bond Features<\/h3>\r\n <ul>\r\n <li><strong>Face Value (Par):<\/strong> Amount repaid at maturity (usually Rs. 1,000)<\/li>\r\n <li><strong>Coupon Rate:<\/strong> Annual interest rate (e.g., 8%)<\/li>\r\n <li><strong>Coupon Payment:<\/strong> Annual interest paid (8% \u00d7 1,000 = Rs. 80)<\/li>\r\n <li><strong>Maturity:<\/strong> Date when principal repaid<\/li>\r\n <li><strong>Yield:<\/strong> Actual return earned<\/li>\r\n <\/ul>\r\n\r\n <h3>Bond Valuation<\/h3>\r\n <div class=\"code-block\"><pre>Bond Price = Sum of PV of all coupon payments + PV of face value\r\n\r\nExample: \r\nBond with Rs. 1,000 face, 8% coupon, 5 years, 10% market yield\r\n\r\nCoupon payment = 1,000 \u00d7 0.08 = Rs. 80 annually\r\n\r\nBond Price = 80\/(1.10) + 80\/(1.10)^2 + ... + 80\/(1.10)^5 + 1,000\/(1.10)^5\r\n = Rs. 924.16<\/pre><\/div>\r\n\r\n <h3>Bond Price Movement<\/h3>\r\n <ul>\r\n <li><strong>Interest rates \u2191 \u2192 Bond price \u2193<\/strong><\/li>\r\n <li><strong>Interest rates \u2193 \u2192 Bond price \u2191<\/strong><\/li>\r\n <li><strong>At maturity \u2192 Bond price = Face value<\/strong><\/li>\r\n <\/ul>\r\n\r\n <h3>Bond Ratings<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Rating<\/th><th>Quality<\/th><th>Risk<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>AAA\/AA<\/td><td>Excellent<\/td><td>Very Low<\/td><\/tr>\r\n <tr><td>A\/BBB<\/td><td>Good\/Fair<\/td><td>Low<\/td><\/tr>\r\n <tr><td>BB\/B<\/td><td>Poor\/Very Poor<\/td><td>High<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate bond price for various scenarios<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-5\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 5<\/div>\r\n <h2>Stock Valuation<\/h2>\r\n <p>Valuing Equity Securities<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Stock Basics<\/h3>\r\n <p><strong>Stock<\/strong> represents ownership in company. Stockholders entitled to profits (dividends) and appreciation.<\/p>\r\n\r\n <h3>Types of Stocks<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Type<\/th><th>Features<\/th><th>Return<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Common Stock<\/td><td>Voting rights, variable dividends<\/td><td>Dividends + Capital gains<\/td><\/tr>\r\n <tr><td>Preferred Stock<\/td><td>Fixed dividends, priority in liquidation<\/td><td>Fixed dividends<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Stock Valuation Methods<\/h3>\r\n\r\n <h3>Dividend Discount Model (DDM)<\/h3>\r\n <div class=\"code-block\"><pre>Gordon Growth Model (constant growth):\r\nP = D1 \/ (r - g)\r\n\r\nWhere:\r\nP = Stock price\r\nD1 = Next year's dividend\r\nr = Required return (discount rate)\r\ng = Constant growth rate\r\n\r\nExample:\r\nD1 = Rs. 50, r = 12%, g = 5%\r\nP = 50 \/ (0.12 - 0.05) = 50 \/ 0.07 = Rs. 714.29<\/pre><\/div>\r\n\r\n <h3>P\/E Multiple Method<\/h3>\r\n <p>Stock Price = Earnings Per Share \u00d7 P\/E Multiple<\/p>\r\n <div class=\"code-block\"><pre>If EPS = Rs. 10 and P\/E = 15\r\nStock Price = 10 \u00d7 15 = Rs. 150<\/pre><\/div>\r\n\r\n <h3>Factors Affecting Stock Price<\/h3>\r\n <ul>\r\n <li>Company earnings and profitability<\/li>\r\n <li>Dividend payments<\/li>\r\n <li>Market conditions and economy<\/li>\r\n <li>Industry trends<\/li>\r\n <li>Management quality<\/li>\r\n <li>Interest rates<\/li>\r\n <\/ul>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate stock price using DDM and P\/E method<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-6\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 6<\/div>\r\n <h2>Capital Budgeting<\/h2>\r\n <p>Long-term Investment Decisions<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Capital Budgeting Definition<\/h3>\r\n <p><strong>Capital Budgeting<\/strong> process of evaluating and selecting long-term investments (projects that affect company for multiple years).<\/p>\r\n\r\n <h3>Evaluation Criteria<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Method<\/th><th>Calculation<\/th><th>Decision Rule<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>NPV<\/td><td>PV of inflows - Outlay<\/td><td>Accept if NPV > 0<\/td><\/tr>\r\n <tr><td>IRR<\/td><td>Discount rate where NPV = 0<\/td><td>Accept if IRR > r<\/td><\/tr>\r\n <tr><td>Payback<\/td><td>Years to recover initial investment<\/td><td>Shorter is better<\/td><\/tr>\r\n <tr><td>Profitability Index<\/td><td>PV of inflows \/ Outlay<\/td><td>Accept if PI > 1<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Net Present Value (NPV)<\/h3>\r\n <div class=\"code-block\"><pre>NPV = -Initial Investment + CF1\/(1+r)^1 + CF2\/(1+r)^2 + ... + CFn\/(1+r)^n\r\n\r\nExample:\r\nProject cost = Rs. 100,000\r\nCash flows Year 1-3: Rs. 40,000 each\r\nDiscount rate = 10%\r\n\r\nNPV = -100,000 + 40,000\/1.1 + 40,000\/1.1^2 + 40,000\/1.1^3\r\n = -100,000 + 36,364 + 33,058 + 30,053\r\n = -Rs. 525\r\n\r\nSince NPV < 0, reject project<\/pre><\/div>\r\n\r\n <h3>Internal Rate of Return (IRR)<\/h3>\r\n <p>Discount rate that makes NPV = 0. Represents project's return.<\/p>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate NPV and IRR; Compare projects<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-7\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 7<\/div>\r\n <h2>Risk & Return<\/h2>\r\n <p>Understanding Risk-Return Tradeoff<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Risk Concept<\/h3>\r\n <p><strong>Risk<\/strong> is uncertainty of returns. Higher risk investments offer higher potential returns.<\/p>\r\n\r\n <h3>Types of Risk<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Risk Type<\/th><th>Description<\/th><th>Example<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Systematic<\/td><td>Market-wide risk (can't diversify)<\/td><td>Recession, inflation<\/td><\/tr>\r\n <tr><td>Unsystematic<\/td><td>Company-specific risk (can diversify)<\/td><td>Management change, strike<\/td><\/tr>\r\n <tr><td>Business<\/td><td>Risk of operations<\/td><td>Sales decline<\/td><\/tr>\r\n <tr><td>Financial<\/td><td>Risk from debt financing<\/td><td>Interest payment default<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Expected Return<\/h3>\r\n <div class=\"code-block\"><pre>Expected Return = \u03a3 (Probability \u00d7 Return)\r\n\r\nExample: Stock returns\r\n50% chance of 15% return\r\n50% chance of 5% return\r\n\r\nE(R) = 0.5 \u00d7 15% + 0.5 \u00d7 5% = 10%<\/pre><\/div>\r\n\r\n <h3>Variance and Standard Deviation<\/h3>\r\n <p><strong>Variance<\/strong> measures spread of returns (volatility). Higher variance = Higher risk.<\/p>\r\n\r\n <h3>Capital Asset Pricing Model (CAPM)<\/h3>\r\n <div class=\"code-block\"><pre>Required Return = Rf + \u03b2(Rm - Rf)\r\n\r\nWhere:\r\nRf = Risk-free rate\r\n\u03b2 = Beta (systematic risk measure)\r\nRm = Market return\r\n\r\nIf Rf = 5%, \u03b2 = 1.2, Rm = 12%\r\nRequired Return = 5% + 1.2(12% - 5%) = 5% + 8.4% = 13.4%<\/pre><\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate expected return and required return using CAPM<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-8\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 8<\/div>\r\n <h2>Capital Structure<\/h2>\r\n <p>Debt vs Equity Financing Mix<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Capital Structure Definition<\/h3>\r\n <p><strong>Capital Structure<\/strong> is mix of debt and equity used to finance assets. Affects risk and return.<\/p>\r\n\r\n <h3>Debt vs Equity<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Aspect<\/th><th>Debt<\/th><th>Equity<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Claim<\/td><td>Fixed obligation<\/td><td>Residual claim<\/td><\/tr>\r\n <tr><td>Cost<\/td><td>Interest (tax-deductible)<\/td><td>Dividend (not tax-deductible)<\/td><\/tr>\r\n <tr><td>Risk<\/td><td>Lower (fixed payments)<\/td><td>Higher (variable)<\/td><\/tr>\r\n <tr><td>Control<\/td><td>Limited voting<\/td><td>Full voting rights<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Optimal Capital Structure<\/h3>\r\n <p>Balance point where Weighted Average Cost of Capital (WACC) is minimized.<\/p>\r\n <div class=\"code-block\"><pre>WACC = (E\/V \u00d7 Re) + (D\/V \u00d7 Rd \u00d7 (1-Tc))\r\n\r\nWhere:\r\nE = Market value of equity\r\nD = Market value of debt\r\nV = E + D (Total value)\r\nRe = Cost of equity\r\nRd = Cost of debt\r\nTc = Tax rate\r\n\r\nExample:\r\nE = 600,000, D = 400,000, V = 1,000,000\r\nRe = 15%, Rd = 8%, Tc = 30%\r\n\r\nWACC = (600,000\/1,000,000 \u00d7 0.15) + (400,000\/1,000,000 \u00d7 0.08 \u00d7 0.70)\r\n = 0.09 + 0.0224 = 11.24%<\/pre><\/div>\r\n\r\n <h3>Trade-off Theory<\/h3>\r\n <ul>\r\n <li>More debt \u2192 Interest tax shield benefit (good)<\/li>\r\n <li>More debt \u2192 Bankruptcy risk increases (bad)<\/li>\r\n <li>Optimal point balances both<\/li>\r\n <\/ul>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate WACC for different capital structures<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-9\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 9<\/div>\r\n <h2>Financial Markets<\/h2>\r\n <p>Where Securities are Bought and Sold<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Financial Market Structure<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Market<\/th><th>Type of Security<\/th><th>Maturity<\/th><th>Examples<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Money Market<\/td><td>Short-term debt<\/td><td>< 1 year<\/td><td>T-bills, Commercial paper<\/td><\/tr>\r\n <tr><td>Capital Market<\/td><td>Long-term debt\/equity<\/td><td>> 1 year<\/td><td>Bonds, Stocks<\/td><\/tr>\r\n <tr><td>Primary Market<\/td><td>New securities<\/td><td>IPO\/New issue<\/td><td>Initial offerings<\/td><\/tr>\r\n <tr><td>Secondary Market<\/td><td>Existing securities<\/td><td>Trading<\/td><td>Stock exchange<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Stock Exchange (Secondary Market)<\/h3>\r\n <ul>\r\n <li><strong>Pakistan Stock Exchange (PSX):<\/strong> Main stock exchange<\/li>\r\n <li><strong>KSE-100 Index:<\/strong> Top 100 companies benchmark<\/li>\r\n <li><strong>Functions:<\/strong> Liquidity, price discovery, regulation<\/li>\r\n <\/ul>\r\n\r\n <h3>Efficient Market Hypothesis<\/h3>\r\n <ul>\r\n <li><strong>Strong Form:<\/strong> No one can beat market<\/li>\r\n <li><strong>Semi-strong:<\/strong> All public info in price<\/li>\r\n <li><strong>Weak Form:<\/strong> Past prices don't predict future<\/li>\r\n <\/ul>\r\n\r\n <h3>Security Types<\/h3>\r\n <ul>\r\n <li><strong>Government Securities:<\/strong> Risk-free, backed by government<\/li>\r\n <li><strong>Corporate Securities:<\/strong> Issued by companies<\/li>\r\n <li><strong>Derivatives:<\/strong> Options, futures, swaps<\/li>\r\n <\/ul>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Analyze stock market performance and company valuations<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-10\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 10<\/div>\r\n <h2>Portfolio Management<\/h2>\r\n <p>Diversification and Optimal Portfolio<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Portfolio Concept<\/h3>\r\n <p><strong>Portfolio<\/strong> is collection of investments. Combines different assets to achieve risk-return objectives.<\/p>\r\n\r\n <h3>Portfolio Return<\/h3>\r\n <div class=\"code-block\"><pre>Portfolio Return = \u03a3 (Weight \u00d7 Individual Return)\r\n\r\nExample: \r\n60% in Stock A (10% return)\r\n40% in Stock B (8% return)\r\n\r\nPortfolio Return = 0.6 \u00d7 10% + 0.4 \u00d7 8% = 9.2%<\/pre><\/div>\r\n\r\n <h3>Portfolio Risk<\/h3>\r\n <p>Depends on:<\/p>\r\n <ul>\r\n <li>Individual asset risks (variance)<\/li>\r\n <li>Correlation between assets (diversification benefit)<\/li>\r\n <\/ul>\r\n <div class=\"code-block\"><pre>Key principle: Correlation < 1 reduces portfolio risk\r\nPerfect correlation (r = 1): No diversification benefit\r\nNo correlation (r = 0): Maximum diversification benefit\r\nNegative correlation (r = -1): Best diversification<\/pre><\/div>\r\n\r\n <h3>Modern Portfolio Theory<\/h3>\r\n <ul>\r\n <li><strong>Efficient Frontier:<\/strong> Best portfolios for each risk level<\/li>\r\n <li><strong>Optimal Portfolio:<\/strong> Highest return for given risk<\/li>\r\n <li><strong>Diversification:<\/strong> Reduces unsystematic risk<\/li>\r\n <\/ul>\r\n\r\n <h3>Asset Allocation Strategy<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Strategy<\/th><th>Allocation<\/th><th>Risk Level<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Aggressive<\/td><td>80% Stocks, 20% Bonds<\/td><td>High<\/td><\/tr>\r\n <tr><td>Moderate<\/td><td>60% Stocks, 40% Bonds<\/td><td>Medium<\/td><\/tr>\r\n <tr><td>Conservative<\/td><td>40% Stocks, 60% Bonds<\/td><td>Low<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Build and analyze optimal portfolio for different investor profiles<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"congrats\">\r\n <h2>\ud83c\udf89 Congratulations!<\/h2>\r\n <p>You've completed Finance! Now master these investment concepts for financial success!<\/p>\r\n <\/div>\r\n\r\n <p style=\"text-align: center; color: var(--mid); font-size: .85rem; padding-bottom: 1rem;\">\r\n \ud83d\udcda Pak Notes Hub \u2014 Finance Complete Notes | University Level | BS Commerce \/ BBA<br>\r\n For corrections and suggestions: support@paknoteshub.com\r\n <\/p>\r\n <\/main>\r\n<\/div>\r\n\r\n<button id=\"back-top\" onclick=\"window.scrollTo({top:0,behavior:'smooth'})\">\u2191<\/button>\r\n\r\n<script>\r\n const progress = document.getElementById('progress');\r\n window.addEventListener('scroll', () => {\r\n const scrollPercent = (window.scrollY \/ (document.documentElement.scrollHeight - window.innerHeight)) * 100;\r\n progress.style.width = scrollPercent + '%';\r\n document.getElementById('back-top').classList.toggle('visible', window.scrollY > 400);\r\n });\r\n \r\n document.querySelectorAll('.unit').forEach(unit => {\r\n const observer = new IntersectionObserver(entries => {\r\n entries.forEach(entry => {\r\n if(entry.isIntersecting) {\r\n const id = entry.target.id;\r\n document.querySelectorAll('.toc-list a').forEach(a => {\r\n a.classList.toggle('active', a.href.endsWith(id));\r\n });\r\n }\r\n });\r\n }, { rootMargin: '-20% 0px -70% 0px' });\r\n observer.observe(unit);\r\n });\r\n<\/script>\r\n<\/body>\r\n<\/html>\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Finance \u2013 University Level \u2013 Pak Notes Hub Pak Notes Hub Basics Investment Markets \ud83d\udcb0 University Level \u2014 BS Commerce \/ BBA FinanceComplete Notes Time Value of Money \u00b7 Stocks \u00b7 Bonds \u00b7 Capital Budgeting \u00b7 Investment Decisions \u00b7 All in Easy Urdu\/English TVM Concepts Securities Capital Structure \ud83d\udcda Table of Contents 1 Basics 2 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_angie_page":false,"footnotes":""},"class_list":["post-542","page","type-page","status-publish","hentry"],"_hostinger_reach_plugin_has_subscription_block":false,"_hostinger_reach_plugin_is_elementor":false,"_links":{"self":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages\/542","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=542"}],"version-history":[{"count":4,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages\/542\/revisions"}],"predecessor-version":[{"id":547,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages\/542\/revisions\/547"}],"wp:attachment":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=542"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

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text-align: left; font-weight: 600; font-size: .82rem; }\r\n .data-table tbody tr:nth-child(even) { background: var(--green-light); }\r\n .data-table tbody tr:hover { background: #d4efdf; }\r\n .data-table td { padding: .6rem 1rem; border-bottom: 1px solid #dce8e0; vertical-align: top; }\r\n .data-table td:first-child { font-weight: 600; color: var(--green-dark); }\r\n\r\n \/* BOXES *\/\r\n .info-box { background: var(--note-bg); border: 1px solid var(--note-border); border-radius: 7px; padding: .85rem 1.1rem; margin: .9rem 0; font-size: .88rem; line-height: 1.6; color: #7d6608; display: flex; align-items: flex-start; gap: .7rem; }\r\n .practice { background: var(--green-light); border: 1.5px dashed var(--green); border-radius: 8px; padding: .85rem 1.1rem; margin-top: 1.4rem; color: var(--green-dark); font-size: .88rem; font-weight: 500; }\r\n\r\n \/* PROGRESS + BACK TOP *\/\r\n .progress-bar { position: fixed; top: 0; left: 0; height: 3px; background: var(--accent); z-index: 200; transition: width .1s linear; 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} nav .nav-links { display: none; } }\r\n <\/style>\r\n<\/head>\r\n<body>\r\n\r\n<div class=\"progress-bar\" id=\"progress\"><\/div>\r\n\r\n<nav>\r\n <div class=\"nav-brand\">Pak <span>Notes Hub<\/span><\/div>\r\n <div class=\"nav-links\">\r\n <a href=\"#unit-1\">Basics<\/a>\r\n <a href=\"#unit-5\">Investment<\/a>\r\n <a href=\"#unit-9\">Markets<\/a>\r\n <\/div>\r\n<\/nav>\r\n\r\n<section class=\"hero\">\r\n <div class=\"hero-tag\">\ud83d\udcb0 University Level \u2014 BS Commerce \/ BBA<\/div>\r\n <h1>Finance<br\/><span>Complete Notes<\/span><\/h1>\r\n <p>Time Value of Money \u00b7 Stocks \u00b7 Bonds \u00b7 Capital Budgeting \u00b7 Investment Decisions \u00b7 All in Easy Urdu\/English<\/p>\r\n <div class=\"hero-pills\">\r\n <div class=\"pill\">TVM Concepts<\/div>\r\n <div class=\"pill\">Securities<\/div>\r\n <div class=\"pill\">Capital Structure<\/div>\r\n <\/div>\r\n<\/section>\r\n\r\n<div class=\"page-wrap\">\r\n\r\n \r\n <aside class=\"sidebar\">\r\n <div class=\"sidebar-title\">\ud83d\udcda Table of Contents<\/div>\r\n <ul class=\"toc-list\">\r\n <li><a href=\"#unit-1\"><span class=\"toc-num\">1<\/span> Basics<\/a><\/li>\r\n <li><a href=\"#unit-2\"><span class=\"toc-num\">2<\/span> Time Value<\/a><\/li>\r\n <li><a href=\"#unit-3\"><span class=\"toc-num\">3<\/span> Annuities<\/a><\/li>\r\n <li><a href=\"#unit-4\"><span class=\"toc-num\">4<\/span> Bonds<\/a><\/li>\r\n <li><a href=\"#unit-5\"><span class=\"toc-num\">5<\/span> Stocks<\/a><\/li>\r\n <li><a href=\"#unit-6\"><span class=\"toc-num\">6<\/span> Capital Budgeting<\/a><\/li>\r\n <li><a href=\"#unit-7\"><span class=\"toc-num\">7<\/span> Risk & Return<\/a><\/li>\r\n <li><a href=\"#unit-8\"><span class=\"toc-num\">8<\/span> Capital Structure<\/a><\/li>\r\n <li><a href=\"#unit-9\"><span class=\"toc-num\">9<\/span> Financial Markets<\/a><\/li>\r\n <li><a href=\"#unit-10\"><span class=\"toc-num\">10<\/span> Portfolio<\/a><\/li>\r\n <\/ul>\r\n <\/aside>\r\n\r\n <main>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-1\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 1<\/div>\r\n <h2>Finance Basics<\/h2>\r\n <p>Introduction to Financial Management<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>What is Finance?<\/h3>\r\n <p><strong>Finance<\/strong> is the management of money and investments. Studies how businesses raise capital and invest it to maximize shareholder value.<\/p>\r\n\r\n <h3>Goals of Financial Management<\/h3>\r\n <ul>\r\n <li><strong>Maximize shareholder wealth:<\/strong> Increase stock price<\/li>\r\n <li><strong>Maximize profit:<\/strong> Generate highest returns<\/li>\r\n <li><strong>Ensure liquidity:<\/strong> Ability to pay short-term obligations<\/li>\r\n <li><strong>Sustainable growth:<\/strong> Long-term value creation<\/li>\r\n <li><strong>Manage risk:<\/strong> Balance safety with returns<\/li>\r\n <\/ul>\r\n\r\n <h3>Functions of Financial Manager<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Function<\/th><th>Activity<\/th><th>Goal<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Planning<\/td><td>Budget, forecast<\/td><td>Allocate resources efficiently<\/td><\/tr>\r\n <tr><td>Investment<\/td><td>Capital budgeting<\/td><td>Select profitable projects<\/td><\/tr>\r\n <tr><td>Financing<\/td><td>Raise capital<\/td><td>Minimize cost of capital<\/td><\/tr>\r\n <tr><td>Dividend<\/td><td>Distribute earnings<\/td><td>Balance growth and returns<\/td><\/tr>\r\n <tr><td>Working Capital<\/td><td>Manage liquidity<\/td><td>Ensure smooth operations<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Areas of Finance<\/h3>\r\n <ul>\r\n <li><strong>Corporate Finance:<\/strong> Decisions within business<\/li>\r\n <li><strong>Personal Finance:<\/strong> Individual wealth management<\/li>\r\n <li><strong>Public Finance:<\/strong> Government fiscal policy<\/li>\r\n <li><strong>International Finance:<\/strong> Cross-border transactions<\/li>\r\n <\/ul>\r\n\r\n <div class=\"info-box\">\ud83d\udca1 <strong>Financial Goal:<\/strong> Maximize shareholder value while maintaining financial stability and ethical practices.<\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> List decisions a finance manager makes daily<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-2\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 2<\/div>\r\n <h2>Time Value of Money (TVM)<\/h2>\r\n <p>A Rupee Today is Worth More Than Tomorrow<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Concept of TVM<\/h3>\r\n <p><strong>Time Value of Money<\/strong> means money available today is worth more than the same amount in the future because you can invest it and earn returns.<\/p>\r\n\r\n <h3>Why TVM Matters?<\/h3>\r\n <ul>\r\n <li>You can earn interest on money invested today<\/li>\r\n <li>Inflation reduces purchasing power<\/li>\r\n <li>Opportunity cost of capital<\/li>\r\n <li>Risk: Future is uncertain<\/li>\r\n <\/ul>\r\n\r\n <h3>Simple Interest vs Compound Interest<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Factor<\/th><th>Simple Interest<\/th><th>Compound Interest<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Formula<\/td><td>I = P \u00d7 r \u00d7 t<\/td><td>A = P(1+r)^t<\/td><\/tr>\r\n <tr><td>Interest On<\/td><td>Principal only<\/td><td>Principal + accumulated interest<\/td><\/tr>\r\n <tr><td>Growth<\/td><td>Linear<\/td><td>Exponential<\/td><\/tr>\r\n <tr><td>Use<\/td><td>Short-term loans<\/td><td>Long-term investments<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Key Formulas<\/h3>\r\n <div class=\"code-block\"><pre>Present Value (PV): What is it worth today?\r\nPV = FV \/ (1 + r)^n\r\n\r\nFuture Value (FV): What will it be worth tomorrow?\r\nFV = PV \u00d7 (1 + r)^n\r\n\r\nWhere:\r\nPV = Present Value\r\nFV = Future Value\r\nr = Interest rate per period\r\nn = Number of periods<\/pre><\/div>\r\n\r\n <h3>Practical Example<\/h3>\r\n <div class=\"code-block\"><pre>If I invest Rs. 10,000 today at 10% annual interest:\r\n- After 1 year: FV = 10,000 \u00d7 (1.10)^1 = 11,000\r\n- After 5 years: FV = 10,000 \u00d7 (1.10)^5 = 16,105.10\r\n\r\nIf I receive Rs. 20,000 after 5 years, worth in today's rupees?\r\nPV = 20,000 \/ (1.10)^5 = 20,000 \/ 1.6105 = 12,418.64<\/pre><\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate PV and FV for various scenarios<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-3\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 3<\/div>\r\n <h2>Annuities & Perpetuities<\/h2>\r\n <p>Series of Equal Payments<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Annuity Definition<\/h3>\r\n <p><strong>Annuity<\/strong> is series of equal cash flows occurring at equal intervals. Examples: salaries, loan payments, insurance premiums.<\/p>\r\n\r\n <h3>Types of Annuities<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Type<\/th><th>Payment Timing<\/th><th>Use<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Ordinary Annuity<\/td><td>End of period<\/td><td>Most common<\/td><\/tr>\r\n <tr><td>Annuity Due<\/td><td>Beginning of period<\/td><td>Lease payments<\/td><\/tr>\r\n <tr><td>Perpetuity<\/td><td>Forever equal payments<\/td><td>Preference dividends<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Annuity Formulas<\/h3>\r\n <div class=\"code-block\"><pre>Future Value of Ordinary Annuity:\r\nFVA = PMT \u00d7 [((1 + r)^n - 1) \/ r]\r\n\r\nPresent Value of Ordinary Annuity:\r\nPVA = PMT \u00d7 [1 - (1 + r)^-n] \/ r\r\n\r\nPerpetuity (forever):\r\nPV = PMT \/ r\r\n\r\nWhere:\r\nPMT = Periodic payment\r\nr = Interest rate\r\nn = Number of periods<\/pre><\/div>\r\n\r\n <h3>Practical Example<\/h3>\r\n <div class=\"code-block\"><pre>You save Rs. 5,000 per year for 10 years at 8% interest.\r\nFV = 5,000 \u00d7 [((1.08)^10 - 1) \/ 0.08]\r\n = 5,000 \u00d7 14.4866\r\n = Rs. 72,433.09\r\n\r\nPreferred dividends of Rs. 10,000 forever at 5% discount:\r\nPV = 10,000 \/ 0.05 = Rs. 200,000<\/pre><\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate FV and PV of annuities<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-4\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 4<\/div>\r\n <h2>Bonds & Debt Valuation<\/h2>\r\n <p>Understanding Fixed Income Securities<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Bond Basics<\/h3>\r\n <p><strong>Bond<\/strong> is a debt security where investor lends money to issuer. Issuer pays periodic interest (coupon) and returns principal at maturity.<\/p>\r\n\r\n <h3>Bond Features<\/h3>\r\n <ul>\r\n <li><strong>Face Value (Par):<\/strong> Amount repaid at maturity (usually Rs. 1,000)<\/li>\r\n <li><strong>Coupon Rate:<\/strong> Annual interest rate (e.g., 8%)<\/li>\r\n <li><strong>Coupon Payment:<\/strong> Annual interest paid (8% \u00d7 1,000 = Rs. 80)<\/li>\r\n <li><strong>Maturity:<\/strong> Date when principal repaid<\/li>\r\n <li><strong>Yield:<\/strong> Actual return earned<\/li>\r\n <\/ul>\r\n\r\n <h3>Bond Valuation<\/h3>\r\n <div class=\"code-block\"><pre>Bond Price = Sum of PV of all coupon payments + PV of face value\r\n\r\nExample: \r\nBond with Rs. 1,000 face, 8% coupon, 5 years, 10% market yield\r\n\r\nCoupon payment = 1,000 \u00d7 0.08 = Rs. 80 annually\r\n\r\nBond Price = 80\/(1.10) + 80\/(1.10)^2 + ... + 80\/(1.10)^5 + 1,000\/(1.10)^5\r\n = Rs. 924.16<\/pre><\/div>\r\n\r\n <h3>Bond Price Movement<\/h3>\r\n <ul>\r\n <li><strong>Interest rates \u2191 \u2192 Bond price \u2193<\/strong><\/li>\r\n <li><strong>Interest rates \u2193 \u2192 Bond price \u2191<\/strong><\/li>\r\n <li><strong>At maturity \u2192 Bond price = Face value<\/strong><\/li>\r\n <\/ul>\r\n\r\n <h3>Bond Ratings<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Rating<\/th><th>Quality<\/th><th>Risk<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>AAA\/AA<\/td><td>Excellent<\/td><td>Very Low<\/td><\/tr>\r\n <tr><td>A\/BBB<\/td><td>Good\/Fair<\/td><td>Low<\/td><\/tr>\r\n <tr><td>BB\/B<\/td><td>Poor\/Very Poor<\/td><td>High<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate bond price for various scenarios<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-5\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 5<\/div>\r\n <h2>Stock Valuation<\/h2>\r\n <p>Valuing Equity Securities<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Stock Basics<\/h3>\r\n <p><strong>Stock<\/strong> represents ownership in company. Stockholders entitled to profits (dividends) and appreciation.<\/p>\r\n\r\n <h3>Types of Stocks<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Type<\/th><th>Features<\/th><th>Return<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Common Stock<\/td><td>Voting rights, variable dividends<\/td><td>Dividends + Capital gains<\/td><\/tr>\r\n <tr><td>Preferred Stock<\/td><td>Fixed dividends, priority in liquidation<\/td><td>Fixed dividends<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Stock Valuation Methods<\/h3>\r\n\r\n <h3>Dividend Discount Model (DDM)<\/h3>\r\n <div class=\"code-block\"><pre>Gordon Growth Model (constant growth):\r\nP = D1 \/ (r - g)\r\n\r\nWhere:\r\nP = Stock price\r\nD1 = Next year's dividend\r\nr = Required return (discount rate)\r\ng = Constant growth rate\r\n\r\nExample:\r\nD1 = Rs. 50, r = 12%, g = 5%\r\nP = 50 \/ (0.12 - 0.05) = 50 \/ 0.07 = Rs. 714.29<\/pre><\/div>\r\n\r\n <h3>P\/E Multiple Method<\/h3>\r\n <p>Stock Price = Earnings Per Share \u00d7 P\/E Multiple<\/p>\r\n <div class=\"code-block\"><pre>If EPS = Rs. 10 and P\/E = 15\r\nStock Price = 10 \u00d7 15 = Rs. 150<\/pre><\/div>\r\n\r\n <h3>Factors Affecting Stock Price<\/h3>\r\n <ul>\r\n <li>Company earnings and profitability<\/li>\r\n <li>Dividend payments<\/li>\r\n <li>Market conditions and economy<\/li>\r\n <li>Industry trends<\/li>\r\n <li>Management quality<\/li>\r\n <li>Interest rates<\/li>\r\n <\/ul>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate stock price using DDM and P\/E method<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-6\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 6<\/div>\r\n <h2>Capital Budgeting<\/h2>\r\n <p>Long-term Investment Decisions<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Capital Budgeting Definition<\/h3>\r\n <p><strong>Capital Budgeting<\/strong> process of evaluating and selecting long-term investments (projects that affect company for multiple years).<\/p>\r\n\r\n <h3>Evaluation Criteria<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Method<\/th><th>Calculation<\/th><th>Decision Rule<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>NPV<\/td><td>PV of inflows - Outlay<\/td><td>Accept if NPV > 0<\/td><\/tr>\r\n <tr><td>IRR<\/td><td>Discount rate where NPV = 0<\/td><td>Accept if IRR > r<\/td><\/tr>\r\n <tr><td>Payback<\/td><td>Years to recover initial investment<\/td><td>Shorter is better<\/td><\/tr>\r\n <tr><td>Profitability Index<\/td><td>PV of inflows \/ Outlay<\/td><td>Accept if PI > 1<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Net Present Value (NPV)<\/h3>\r\n <div class=\"code-block\"><pre>NPV = -Initial Investment + CF1\/(1+r)^1 + CF2\/(1+r)^2 + ... + CFn\/(1+r)^n\r\n\r\nExample:\r\nProject cost = Rs. 100,000\r\nCash flows Year 1-3: Rs. 40,000 each\r\nDiscount rate = 10%\r\n\r\nNPV = -100,000 + 40,000\/1.1 + 40,000\/1.1^2 + 40,000\/1.1^3\r\n = -100,000 + 36,364 + 33,058 + 30,053\r\n = -Rs. 525\r\n\r\nSince NPV < 0, reject project<\/pre><\/div>\r\n\r\n <h3>Internal Rate of Return (IRR)<\/h3>\r\n <p>Discount rate that makes NPV = 0. Represents project's return.<\/p>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate NPV and IRR; Compare projects<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-7\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 7<\/div>\r\n <h2>Risk & Return<\/h2>\r\n <p>Understanding Risk-Return Tradeoff<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Risk Concept<\/h3>\r\n <p><strong>Risk<\/strong> is uncertainty of returns. Higher risk investments offer higher potential returns.<\/p>\r\n\r\n <h3>Types of Risk<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Risk Type<\/th><th>Description<\/th><th>Example<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Systematic<\/td><td>Market-wide risk (can't diversify)<\/td><td>Recession, inflation<\/td><\/tr>\r\n <tr><td>Unsystematic<\/td><td>Company-specific risk (can diversify)<\/td><td>Management change, strike<\/td><\/tr>\r\n <tr><td>Business<\/td><td>Risk of operations<\/td><td>Sales decline<\/td><\/tr>\r\n <tr><td>Financial<\/td><td>Risk from debt financing<\/td><td>Interest payment default<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Expected Return<\/h3>\r\n <div class=\"code-block\"><pre>Expected Return = \u03a3 (Probability \u00d7 Return)\r\n\r\nExample: Stock returns\r\n50% chance of 15% return\r\n50% chance of 5% return\r\n\r\nE(R) = 0.5 \u00d7 15% + 0.5 \u00d7 5% = 10%<\/pre><\/div>\r\n\r\n <h3>Variance and Standard Deviation<\/h3>\r\n <p><strong>Variance<\/strong> measures spread of returns (volatility). Higher variance = Higher risk.<\/p>\r\n\r\n <h3>Capital Asset Pricing Model (CAPM)<\/h3>\r\n <div class=\"code-block\"><pre>Required Return = Rf + \u03b2(Rm - Rf)\r\n\r\nWhere:\r\nRf = Risk-free rate\r\n\u03b2 = Beta (systematic risk measure)\r\nRm = Market return\r\n\r\nIf Rf = 5%, \u03b2 = 1.2, Rm = 12%\r\nRequired Return = 5% + 1.2(12% - 5%) = 5% + 8.4% = 13.4%<\/pre><\/div>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate expected return and required return using CAPM<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-8\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 8<\/div>\r\n <h2>Capital Structure<\/h2>\r\n <p>Debt vs Equity Financing Mix<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Capital Structure Definition<\/h3>\r\n <p><strong>Capital Structure<\/strong> is mix of debt and equity used to finance assets. Affects risk and return.<\/p>\r\n\r\n <h3>Debt vs Equity<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Aspect<\/th><th>Debt<\/th><th>Equity<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Claim<\/td><td>Fixed obligation<\/td><td>Residual claim<\/td><\/tr>\r\n <tr><td>Cost<\/td><td>Interest (tax-deductible)<\/td><td>Dividend (not tax-deductible)<\/td><\/tr>\r\n <tr><td>Risk<\/td><td>Lower (fixed payments)<\/td><td>Higher (variable)<\/td><\/tr>\r\n <tr><td>Control<\/td><td>Limited voting<\/td><td>Full voting rights<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Optimal Capital Structure<\/h3>\r\n <p>Balance point where Weighted Average Cost of Capital (WACC) is minimized.<\/p>\r\n <div class=\"code-block\"><pre>WACC = (E\/V \u00d7 Re) + (D\/V \u00d7 Rd \u00d7 (1-Tc))\r\n\r\nWhere:\r\nE = Market value of equity\r\nD = Market value of debt\r\nV = E + D (Total value)\r\nRe = Cost of equity\r\nRd = Cost of debt\r\nTc = Tax rate\r\n\r\nExample:\r\nE = 600,000, D = 400,000, V = 1,000,000\r\nRe = 15%, Rd = 8%, Tc = 30%\r\n\r\nWACC = (600,000\/1,000,000 \u00d7 0.15) + (400,000\/1,000,000 \u00d7 0.08 \u00d7 0.70)\r\n = 0.09 + 0.0224 = 11.24%<\/pre><\/div>\r\n\r\n <h3>Trade-off Theory<\/h3>\r\n <ul>\r\n <li>More debt \u2192 Interest tax shield benefit (good)<\/li>\r\n <li>More debt \u2192 Bankruptcy risk increases (bad)<\/li>\r\n <li>Optimal point balances both<\/li>\r\n <\/ul>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Calculate WACC for different capital structures<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-9\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 9<\/div>\r\n <h2>Financial Markets<\/h2>\r\n <p>Where Securities are Bought and Sold<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Financial Market Structure<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Market<\/th><th>Type of Security<\/th><th>Maturity<\/th><th>Examples<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Money Market<\/td><td>Short-term debt<\/td><td>< 1 year<\/td><td>T-bills, Commercial paper<\/td><\/tr>\r\n <tr><td>Capital Market<\/td><td>Long-term debt\/equity<\/td><td>> 1 year<\/td><td>Bonds, Stocks<\/td><\/tr>\r\n <tr><td>Primary Market<\/td><td>New securities<\/td><td>IPO\/New issue<\/td><td>Initial offerings<\/td><\/tr>\r\n <tr><td>Secondary Market<\/td><td>Existing securities<\/td><td>Trading<\/td><td>Stock exchange<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <h3>Stock Exchange (Secondary Market)<\/h3>\r\n <ul>\r\n <li><strong>Pakistan Stock Exchange (PSX):<\/strong> Main stock exchange<\/li>\r\n <li><strong>KSE-100 Index:<\/strong> Top 100 companies benchmark<\/li>\r\n <li><strong>Functions:<\/strong> Liquidity, price discovery, regulation<\/li>\r\n <\/ul>\r\n\r\n <h3>Efficient Market Hypothesis<\/h3>\r\n <ul>\r\n <li><strong>Strong Form:<\/strong> No one can beat market<\/li>\r\n <li><strong>Semi-strong:<\/strong> All public info in price<\/li>\r\n <li><strong>Weak Form:<\/strong> Past prices don't predict future<\/li>\r\n <\/ul>\r\n\r\n <h3>Security Types<\/h3>\r\n <ul>\r\n <li><strong>Government Securities:<\/strong> Risk-free, backed by government<\/li>\r\n <li><strong>Corporate Securities:<\/strong> Issued by companies<\/li>\r\n <li><strong>Derivatives:<\/strong> Options, futures, swaps<\/li>\r\n <\/ul>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Analyze stock market performance and company valuations<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"unit\" id=\"unit-10\">\r\n <div class=\"unit-header\">\r\n <div class=\"unit-num-badge\">Unit 10<\/div>\r\n <h2>Portfolio Management<\/h2>\r\n <p>Diversification and Optimal Portfolio<\/p>\r\n <\/div>\r\n <div class=\"unit-body\">\r\n\r\n <h3>Portfolio Concept<\/h3>\r\n <p><strong>Portfolio<\/strong> is collection of investments. Combines different assets to achieve risk-return objectives.<\/p>\r\n\r\n <h3>Portfolio Return<\/h3>\r\n <div class=\"code-block\"><pre>Portfolio Return = \u03a3 (Weight \u00d7 Individual Return)\r\n\r\nExample: \r\n60% in Stock A (10% return)\r\n40% in Stock B (8% return)\r\n\r\nPortfolio Return = 0.6 \u00d7 10% + 0.4 \u00d7 8% = 9.2%<\/pre><\/div>\r\n\r\n <h3>Portfolio Risk<\/h3>\r\n <p>Depends on:<\/p>\r\n <ul>\r\n <li>Individual asset risks (variance)<\/li>\r\n <li>Correlation between assets (diversification benefit)<\/li>\r\n <\/ul>\r\n <div class=\"code-block\"><pre>Key principle: Correlation < 1 reduces portfolio risk\r\nPerfect correlation (r = 1): No diversification benefit\r\nNo correlation (r = 0): Maximum diversification benefit\r\nNegative correlation (r = -1): Best diversification<\/pre><\/div>\r\n\r\n <h3>Modern Portfolio Theory<\/h3>\r\n <ul>\r\n <li><strong>Efficient Frontier:<\/strong> Best portfolios for each risk level<\/li>\r\n <li><strong>Optimal Portfolio:<\/strong> Highest return for given risk<\/li>\r\n <li><strong>Diversification:<\/strong> Reduces unsystematic risk<\/li>\r\n <\/ul>\r\n\r\n <h3>Asset Allocation Strategy<\/h3>\r\n <table class=\"data-table\">\r\n <thead>\r\n <tr><th>Strategy<\/th><th>Allocation<\/th><th>Risk Level<\/th><\/tr>\r\n <\/thead>\r\n <tbody>\r\n <tr><td>Aggressive<\/td><td>80% Stocks, 20% Bonds<\/td><td>High<\/td><\/tr>\r\n <tr><td>Moderate<\/td><td>60% Stocks, 40% Bonds<\/td><td>Medium<\/td><\/tr>\r\n <tr><td>Conservative<\/td><td>40% Stocks, 60% Bonds<\/td><td>Low<\/td><\/tr>\r\n <\/tbody>\r\n <\/table>\r\n\r\n <div class=\"practice\"><strong>\u270f\ufe0f Practice:<\/strong> Build and analyze optimal portfolio for different investor profiles<\/div>\r\n <\/div>\r\n <\/div>\r\n\r\n \r\n <div class=\"congrats\">\r\n <h2>\ud83c\udf89 Congratulations!<\/h2>\r\n <p>You've completed Finance! Now master these investment concepts for financial success!<\/p>\r\n <\/div>\r\n\r\n <p style=\"text-align: center; color: var(--mid); font-size: .85rem; padding-bottom: 1rem;\">\r\n \ud83d\udcda Pak Notes Hub \u2014 Finance Complete Notes | University Level | BS Commerce \/ BBA<br>\r\n For corrections and suggestions: support@paknoteshub.com\r\n <\/p>\r\n <\/main>\r\n<\/div>\r\n\r\n<button id=\"back-top\" onclick=\"window.scrollTo({top:0,behavior:'smooth'})\">\u2191<\/button>\r\n\r\n<script>\r\n const progress = document.getElementById('progress');\r\n window.addEventListener('scroll', () => {\r\n const scrollPercent = (window.scrollY \/ (document.documentElement.scrollHeight - window.innerHeight)) * 100;\r\n progress.style.width = scrollPercent + '%';\r\n document.getElementById('back-top').classList.toggle('visible', window.scrollY > 400);\r\n });\r\n \r\n document.querySelectorAll('.unit').forEach(unit => {\r\n const observer = new IntersectionObserver(entries => {\r\n entries.forEach(entry => {\r\n if(entry.isIntersecting) {\r\n const id = entry.target.id;\r\n document.querySelectorAll('.toc-list a').forEach(a => {\r\n a.classList.toggle('active', a.href.endsWith(id));\r\n });\r\n }\r\n });\r\n }, { rootMargin: '-20% 0px -70% 0px' });\r\n observer.observe(unit);\r\n });\r\n<\/script>\r\n<\/body>\r\n<\/html>\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Finance \u2013 University Level \u2013 Pak Notes Hub Pak Notes Hub Basics Investment Markets \ud83d\udcb0 University Level \u2014 BS Commerce \/ BBA FinanceComplete Notes Time Value of Money \u00b7 Stocks \u00b7 Bonds \u00b7 Capital Budgeting \u00b7 Investment Decisions \u00b7 All in Easy Urdu\/English TVM Concepts Securities Capital Structure \ud83d\udcda Table of Contents 1 Basics 2 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_angie_page":false,"footnotes":""},"class_list":["post-542","page","type-page","status-publish","hentry"],"_hostinger_reach_plugin_has_subscription_block":false,"_hostinger_reach_plugin_is_elementor":false,"_links":{"self":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages\/542","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=542"}],"version-history":[{"count":4,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages\/542\/revisions"}],"predecessor-version":[{"id":547,"href":"https:\/\/paknoteshub.online\/index.php?rest_route=\/wp\/v2\/pages\/542\/revisions\/547"}],"wp:attachment":[{"href":"https:\/\/paknoteshub.online\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=542"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}