# BØK 1121 Finance I

## BØK 1121 Finance I

Course code:
BØK 1121
Department:
Finance
Credits:
7.5
Course coordinator:
Knut Sagmo
Course name in Norwegian:
Finans I
Product category:
Bachelor
Portfolio:
Bachelor of Science in Business and Economics - Programme Courses
Semester:
2024 Spring
Active status:
Active
Level of study:
Bachelor
Teaching language:
Norwegian
Course type:
One semester
Introduction

This introductory course focuses on acquiring basic skills in applying mathematical finance and standard models used to assess profitability. Moving from an economic environment characterized by complete certainty, the analysis subsequently extends to incorporate uncertainty (risk) and how uncertainty affects the required rate of return on real-investment projects. Since the required rate of return emanates as an alternative cost of capital in well-functioning markets, the course also provides a brief introduction to capital market theory.

Learning outcomes - Knowledge

Upon completing the course, it is expected from students that they:

• Understand how financial mathematics (application of different discounting models) facilitates correct calculation (and estimation) of the time value of money.
• Understand how different models used to analyse profitability (net present value, internal rate of return, payback) facilitate estimate of the expected return on real investments.
• Understand how portfolio theory and diversification helps identify and distinguish, as well, between relevant (systematic) and irrelevant (unsystematic) risk.
• Understand why the capital asset pricing model (CAPM) generates required rates of return that appropriately take into account only relevant risk for investors in well-functioning markets.
Learning outcomes - Skills

Having completed this course, it is expected that students know how to:

• To apply financial mathematics (discounting models) in order to correctly calculate the time value of money for a variety of applications.
• To apply different models of profitability (net present value, internal rate of return, payback) in order to estimate real investments expected return.
• Apply portfolio theory and the notion of diversification to distinguish between relevant (systematic) and irrelevant (unsystematic) risk for investors.
• Applying the Capital Asset Pricing Model (CAPM) in order to calculate expected (required) rates of return taking into account, and including, only investors' exposure to relevant (systematic) risk in well-functioning markets.
General Competence

A main focus of the course is understanding the assumptions based on which the different models of profitability are based. Successful application requires comprehension of the models' limitations in practical use.

Course content
• Introduction: Brief overview of main topics and their general role in modern managerial economics.
• The basic tools of financial mathematics
• Models of profitability and use of decision criteria when applying the net present value principle, the internal rate of return and payback models.
• Portfolio diversification and estimation of relevant risk.
• Capital asset pricing model to estimate the risk-adjusted, required rate of return.
Teaching and learning activities

There are 15 sessions each loading 2 lecture hours for a total of 30 lecture hours. Immediately following each class, there is a two-hour plenary session where home-assignments (distributed in advance) are reviewed and discussed with the lecturer present. A total of 13 home assignments are reviews in 14 weekly plenary sessions allowing students to test their progress when it comes to skills and comprehension of the course material. In three of the 14 sessions, student assistants are also present and available to answer questions from the students.

In order to accommodate an active and inspiring learning environment, two-way communication between students and the lecturer is vitally important. It is expected from students that they participate during class and during the plenary sessions by asking questions.

Excel software is used when working financial mathematics problems and firms' multi-year capital budgeting analysis. Students are strongly encouraged to acquire skills in Excel.

The course requires a normal work-effort of 12- 15 hours per week. As of the beginning of the semester, students are made aware of the required amount of work.

Software tools
Software defined under the section "Teaching and learning activities".
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Qualifications

Higher Education Entrance Qualification

### Disclaimer

Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.

Required prerequisite knowledge

Basic courses in mathematics I and managerial economics during the Fall semester of Year 1, and mathematics II, statistics, and microeconomics during the Spring semester of Year 1.

Assessments
Assessments
Exam category:
Submission
Form of assessment:
Written submission
Invigilation
Weight:
100
Grouping:
Individual
Support materials:
• BI-approved exam calculator
• Simple calculator
• Bilingual dictionary
• Interest table
Duration:
3 Hour(s)
Exam code:
BØK11211
ECTS
Resit:
Examination every semester
Type of Assessment:
Ordinary examination
Total weight:
100
ActivityDurationComment
Teaching
30 Hour(s)
15 lectures of two hours duration.
Individual problem solving
107 Hour(s)
Independent work on 10 Home Assignments
Feedback activities and counselling
30 Hour(s)
15 sessions of two hours of assignment seminar.
Prepare for teaching
30 Hour(s)
One and a half to two hours of preparation prior to attending class.
Examination
3 Hour(s)
Exam