Key Information
About the content
This is a two-part course, and part of the MicroMasters® Program in Finance. It provides a rigorous and comprehensive introduction to the fundamentals of modern finance and their applications to business challenges in valuation, investments, and corporate financial decisions under a unified framework.
Completing this first course and program will help you prepare for a career as a financial analyst, financial advisor, vice president for finance, chief financial officer, and more.
Finance provides a core function in any productive economy by providing a mechanism for savings, investment, and liquidity. Whether the learner is in a industrialized country or a developing country, financial services are essential for smooth functioning of the economy.
- Valuation of fixed income securities and common stocks
- Risk analysis, the Arbitrage Pricing Theory (APT), and the Efficient Market Hypothesis
- Introduction to corporate finance and capital budgeting
- Valuation of derivative securities
- Portfolio theory and the Capital Asset Pricing Model (CAPM)
- Corporate financial decisions
- Real options, capital structure, payout policy, corporate bonds; and
- Interaction between investment and financing decisions
Prerequisite
- Basic Probability and Statistics;
- Calculus
Syllabus
Introduction to Finance
- Financial decisions of households and corporations
- Approaches to valuing financial and real assets
- The role and the overview of financial markets
- Financial Frictions
- Unifying principles of finance
Market Prices and Present Value
- State-space model for time and risk
- Security prices, state prices and arbitrage pricing
- Present Value (PV) and future value
- Discount rates, time value and risk premium: a historic perspective
- Compound interest
- Annuity and perpetuity formulas
Fixed Income Securities
- Fixed-income markets
- Term structure of interest rates
- Properties of bond prices and market conventions
- Inflation and real rates
Common Stocks
- Discounted Cash Flow (DCF) model
- Gordon model, multi-stage growth model
- EPS, P/E, PVGO
Risk
- Decision under uncertainty and expected utility theory
- Risk aversion
- Diversification and portfolio analytics
- Systematic and idiosyncratic risks
Factor models and Arbitrage Pricing Theory (APT)
- Factor models for risk
- APT
- Applications of APT
Market Efficiency
- Efficient Market Hypothesis (EMH)
- Implications of EMH
- Empirical evidence on EMH
Introduction to Corporate Finance
- Corporate financial decisions
- Opportunity cost of capital and NPV
- Financial objective of corporate managers
Capital Budgeting
- NPV rules
- Cash flow calculations
- Alternatives to NPV
- Project interactions
- Capital budgeting and discount rates
Instructors
Leonid Kogan
Nippon Telegraph & Telephone Professor of Management and a Professor of Finance
Massachusetts Institute of Technology
Jiang Wang
Mizuho Financial Group Professor and a Professor of Finance, Sloan School of Management
Massachusetts Institute of Technology
Egor Matveyev
Executive Director of MicroMasters Program in Finance
Massachusetts Institute of Technology
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