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Principles of Finance

Overview

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

Module description

This module introduces the basic principles of finance. It introduces the notions of time value of money, arbitrage, efficient markets and risk diversification, and discusses 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.

Learning objectives

On successful completion of this course, 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 and be able to define the key characteristics of the portfolio opportunity set under risk
  • demonstrate that you are 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.

Recommended reading

  • Bodie, Z., Kane, A. and Marcus, A., Investments (sixth edition) (McGraw-Hill Irwin, 2004).
  • Breale, R., Myers, S. and Allen, F., Principles of Corporate Finance (McGraw-Hill Irwin).