BØK 1121 Finance I
BØK 1121 Finance I
This introductory course focuses mainly on the investment part of the subject finance. The purpose is to give students the necessary knowledge about the terms and methods used to make investment decisions. It has to be mentioned that even if the main focus is on financial investments (stocks and bonds), the methodology is also applicable to real investments.
On completion of the course students should be able to:
- Understand the importance of investment analysis in finance.
- Understand why there is a focus on cash flows and not on earnings.
- Understand what the actual size of a cash flow means.
- Understand how and when to use the different rules of discounting and compounding.
- Understand how to interpret the cost of capital/discount rate.
- Understand the meaning of, and difference between, the different decision criteria behind an investment. Here: Net Present Value (NPV), Internal Rate of Return (IRR), Payback etc.
- Understand the meaning of the term structure of interest rates and forward rates.
- Understand the concepts of total risk, relevant risk and irrelevant risk.
- Understand the content in portfolio theory and its importance in what we call diversification benefits.
- Understand Beta and the basis for interpreting the size of this.
- Understand the Capital Asset Pricing Model (CAPM) and how it is derived.
- Understand the meaning of Weighted Average Cost of Capital (WACC) and when to use it.
- Understand the concept of market efficiency.
On completion of the course, students should be able to:
- To use the different discounting rules both with the use of a financial calculator and interest tables.
- To use the different decision criteria related to both stocks and bonds.
- Calculate forward rates.
- Use portfolio theory for different investment alternatives.
- Use the Capital Asset Pricing Model (CAPM).
After taking the course, the students should be able to ask critical questions and reflect on the crucial assumptions behind the theories taught. They should also be able to reflect on the practical relevance of the mentioned theories.
- Introduction
- Cash flow
- Compounding and discounting rules/mathematical finance
- Capital Budgeting
- The term structure of interest rates
- Capital Asset Pricing Model (CAPM)
- Weighted Average Cost of Capital (WACC)
- Market efficiency
The course includes 13 lectures, each of 3 hours. There will also be two three-hour sessions where former examination papers are reviewed. The total number of hours is 45.
To stimulate a good learning environment two-way communication with the students and the lecturer is preferable. It is the students’ responsibility to participate in the lectures with questions, comments and discussion. The lecturer, therefore, has the opportunity to ask each student questions.
Students are expected to attend seminar groups to ensure that the learning process is continuous. In this way, a deeper understanding of the subject is achieved. Seminar groups led by experienced students are offered throughout the semester on specified dates.
No specisifc softwear are required, but use of Excel can be useful when solving assignments.
The form of evaluation has been changed from 3-hour Multiple Choice Examination, academic year 2017/2018 to 3-hour Written exam, academic year 2018/2019. This means that students who wish to re-sit in the autumn of 2018, must comply with a 3-hour written exam.
Higher Education Entrance Qualification.
Basic bachelor courses in Mathematics and Statistics.
| Assessments |
|---|
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 100 Grouping: Individual Support materials:
Duration: 3 Hour(s) Exam code: BØK11211 Grading scale: ECTS Resit: Examination every semester |
| Activity | Duration | Comment |
|---|---|---|
Teaching | 39 Hour(s) | |
Prepare for teaching | 18 Hour(s) | |
Other in classroom | 6 Hour(s) | |
Prepare for teaching | 18 Hour(s) | |
Group work / Assignments | 59 Hour(s) | |
Student's own work with learning resources | 60 Hour(s) |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.