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MIT15 401F08 Courseoutline

This document provides an overview of the topics that will be covered in an introductory finance course, including: - Introduction to key financial concepts such as time value of money, valuation, risk and return - Methods for valuing different asset classes such as fixed income securities, stocks, forwards/futures, and options using models like present value, discounted cash flow and Black-Scholes - Portfolio theory and models for analyzing risk such as CAPM - Corporate finance topics like capital budgeting and theories of market efficiency The course will cover these essential finance concepts across multiple chapters and sections.

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Diego Ormazábal
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61 views

MIT15 401F08 Courseoutline

This document provides an overview of the topics that will be covered in an introductory finance course, including: - Introduction to key financial concepts such as time value of money, valuation, risk and return - Methods for valuing different asset classes such as fixed income securities, stocks, forwards/futures, and options using models like present value, discounted cash flow and Black-Scholes - Portfolio theory and models for analyzing risk such as CAPM - Corporate finance topics like capital budgeting and theories of market efficiency The course will cover these essential finance concepts across multiple chapters and sections.

Uploaded by

Diego Ormazábal
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Part A.

Introduction Introduction to Finance and Course Overview (Chapters 1-2)


Financial decisions of households and corporations Objectives of corporate financial managers Approaches to valuing financial and real assets Opportunity of cost of capital The role of financial markets Unifying principles of finance

Present Value (Chapter 3)


Present value (PV) and net present value (NPV) Discount rates and the time value of money Mechanics of NPV calculations Compound interest Annuity and perpetuity formulas Real vs. nominal cash flows

Part B. Valuation Fixed-Income Securities (Chapters 4, 24-25)


Fixed-income markets Term structure of interest rates Market conventions, properties of bond prices Measuring and hedging interest rate risk Inflation risk, credit risk

Common Stocks (Chapter 5)


Discounted cash flow (DCF) model Earnings per share (EPS), price-to-earnings ratio (P/E), discount rates

Forward and Futures Contracts (Chapter 27)


Definitions of forwards and futures Arbitrage pricing relations Using forwards and futures to hedge

Options (Chapters 21-22)


Basic properties of options Valuation of options Binomial and Black-Scholes pricing models

Part C. Risk and Return Introduction to Risk and Return (Chapters 7, 24.1, 24.4)

Historical asset returns Risk/reward trade-off

Risk Analytics (Chapter 8)


Measures of risk Risk and investment horizon

Portfolio Theory (Chapters 8, 9.1)


Diversification, systematic and idiosyncratic risk Portfolio optimization Efficient risk/return trade-offs

The Capital Asset Pricing Model (CAPM) (Chapters 9.2-9.3)


The CAPM and linear risk/return trade-offs Applications of the CAPM Empirical evidence and extensions of the CAPM

Part D. Corporate Finance Capital Budgeting I (Chapters 6-7, 10, 23)


Capital budgeting criteria NPV rule, cash flow calculations, discount rates

Capital Budgeting II

Project interactions Real options

Capital Budgeting III

Case discussion: Acid Rain

Market Efficiency (Chapter 14)


Origins of the efficient markets hypothesis (EMH) Implications and empirical tests of the EMH Recent developments

MIT OpenCourseWare http://ocw.mit.edu

15.401 Finance Theory I


Fall 2008

For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.

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