# GRA 6540 Applied Finance

## GRA 6540 Applied Finance

Applied Finance is a useful addition to undergraduate corporate finance courses for all MSc in Business students, except finance majors. Note that this course does not qualify as a prerequisite for advanced specialization courses in finance.

The first half of the course will revisit the basic principles for investment decisions, valuing financial assets, and challenge the students to implement them. We will focus on capital budgeting decisions, portfolio theory (mean-variance analysis), the CAPM and some extensions thereof.

The second half of the course will first revisit the basic insight in capital structure with a particular focus on the Miller Modigliani Theorem and when it does and does not hold. We will apply this knowledge to some real world case studies. Lectures will be used to refresh the theory and are followed up by examples and exercises, small projects and cases that give students the opportunity to apply the concepts and techniques to real-world situations. The cases will provide hands-on experience with real data.

The goal of this course is to make students apply the fundamental concepts in investments and corporate finance. To this end students will use the analytical tools previously learned in real data applications with a focus on asset pricing models and solving business cases. The methods addressed in this course are at the very core of finance and are an essential part of the toolkit of financial managers. To better connect theory and practice, a crucial part of the course consists of projects using real data and cases.

By the end of the course, students who mastered it will have the financial background and the analytical tools necessary for making good investment decisions, understanding the paradigms in asset pricing, analyzing the impact of each financing type on firms' value, and having a better grasp of the financial news.

- Applying the different investment decision rules
- Using modern portfolio optimization techniques
- Measuring and analyzing risk and return for different financial securities
- Finding the optimal portfolio choice for different types of investors
- Understanding capital structure decisions of firms

- Ability to understand and analyze investment decisions for different types of investors and in different periods of time
- Appreciation of the complexity of investment decisions and having a framework to help understanding the whole picture
- Ability to distinguish different types of risks in each investment decision
- Understanding of the link between firm value and capital structure of a firm

- Introduction to financial markets/instruments
- Capital budgeting decisions
- Portfolio tools
- Mean-variance analysis
- Capital Asset Pricing Model (CAPM)
- Capital structure in perfect markets
- Capital structure with taxes
- Capital structure with bankruptcy costs

The instruction consists of combination of lectures, in-class and in-group problem solving, and discussion of cases. Students are expected to have read the materials before each class meeting.

This course requires students to hand in two problem-sets and two cases using real data (all done in groups). Cases can be solved in Excel or a programming language like R or Python. Since 30% of the total grade will come from these assignments, students are expected to spend a considerable amount of time doing these exercises throughout the semester.

Finally, students are expected to participate in class discussions whenever asked.

**This course is not for students doing MSc in Business, major in Finance or students in the MSc in Finance programme. **

Please note that it is the student’s own responsibility to obtain any information provided in class.

This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded by using points on a scale from 0-100. The components will be weighted together according to the information in the course description in order to calculate the final letter grade for the examination code (course). Students who fail to participate in one/some/all exam elements will get a lower grade or may fail the course. You will find detailed information about the point system and the cut off points with reference to the letter grades when the course starts.

At resit, all exam components must, as a main rule, be retaken during next scheduled course.

All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.

Exam category | Weight | Invigilation | Duration | Support materials | Grouping | Comment exam |
---|---|---|---|---|---|---|

Exam category:Submission Form of assessment:Written submission Exam code:GRA65401 Grading scale:Point scale Grading rules:Internal examiner Resit:All components must, as a main rule, be retaken during next scheduled course | 30 | No | 1 Semester(s) | Group ( 2 - 4) | Assignments (two problem-sets and two cases) | |

Exam category:Submission Form of assessment:Written submission Exam code:GRA65401 Grading scale:Point scale Grading rules:Internal and external examiner Resit:All components must, as a main rule, be retaken during next scheduled course | 70 | Yes | 3 Hour(s) | - BI-approved exam calculator
- Simple calculator
- Bilingual dictionary
| Individual | Written examination under supervision. |

A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 6 ECTS credits corresponds to a workload of at least 160 hours.