Principles of Finance

• Credit value: 30 credits at Level 5
• Convenor: Dr Roald Versteeg
• Assessment: examination (80%) and coursework (20%)

In this module we introduce you to the basic principles of finance. We will cover the notions of time value of money, arbitrage, efficient markets and risk diversification, and discuss the main funcions of capital markets and financial institutions and the main financial instruments traded in these markets. Modern portfolio theory and asset pricing modules are also introduced.

By the end of this module, you should:

• understand the importance of efficient and competitive markets
• be able to describe how discount rates are determined by financial markets
• understand the concept of the time value of money
• understand the economic theory of choice as it applies to portfolio structuring
• be able to define the key characteristics of the portfolio opportunity set under risk
• be able to derive the capital asset pricing model and understand the application in the construction of optimal portfolios
• be able to describe the efficient markets hypothesis
• understand the characteristics of bonds and shares
• understand the characteristics of options.