Introduction to Finance

Learning Outcomes

(1) Basic Introduction to Finance and Financial Concepts This section will provide basic definitions, and description of concepts involving finance and financial portfolio management. This section will lay the foundation and bases for the module. (2) Time Value of Money, Bond and Stocks This section starts with the study of time of money. Detail attention is provided in how to calculate the value of financial assets and the value of money in the future and the past. The concept of time value of money is also used to see how bonds and stocks are valued and priced. This section is mostly mathematical and involves application of formulas. (3) Value and Capital Budgeting Using the concept of time of money this section further analyses how firms decide several investment projects which one to choose. This section is mostly mathematical and involves application of formulas. (4) Theory of Choice This section will discuss the theory of choice under certain conditions and uncertainty. The section will discuss individual investor’s behaviour and rational choices under uncertainty. The section will further discuss the utility function and risk averseness of the investors. (5) Portfolio and Capital Market Theory This section will discuss and derive the risk and return models applied in portfolio management including the CAPM and APT model of risk and return. This section will explain and derives these models in mathematical detail. (6) Efficient Market Hypothesis This section will discuss the efficient market hypothesis (EMH) in capital markets. Discussion will involve the different forms of EMH, the implications of EMH on portfolio management and EMH and price bubbles. The section will further discuss how to test for the different forms of EMH.

The course will consists of 12 weekly 2-hour lectures covering theory and problem solving. PowerPoint slides are used to deliver the relevant material and provide the key concepts and theories. Many lectures will also involve various numerical and quantitative techniques with the aim to enhance the level of understanding and strengthen the quantitative skills of students. Learning activities include: • Numerical exercises in class and for homework • A group assignment • Presentation of findings in class