Introduction to Financial Economics

Curriculum guideline

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Course
ECON 2298
Discontinued
No
Course code
ECON 2298
Descriptive
Introduction to Financial Economics
Department
Economics
Faculty
Commerce & Business Administration
Credits
3.00
Start date
End term
202030
PLAR
No
Semester length
14 Weeks X 4 Hours per Week = 56 Hours
Max class size
35
Contact hours
Lecture: 3 Hours Discussion: 1 Hour
Method(s) of instruction
Lecture
Learning activities

Lecture and discussion.

Course description
Introduction to Financial Economics introduces the basic principles of financial valuation, including the time-value of money and the risk/return tradeoff. It develops tools for the quantitative analysis of corporate and/or individual financing decisions, and of capital budgeting decisions. Students will learn how investors think about the value of streams of cash flows that arrive at different times. Students will also examine capital budgeting decisions and the evaluation of those decisions. The concept of risk and methods of valuing risky assets will also be examined by students in this course.
Course content
  1. Overview of Corporate Finance and Financial Statements
  2. Valuation of Future Cash Flows
  3. Discounted Cash Flow Valuation
  4. Interest Rates and Bond Valuation
  5. Stock Valuation
  6. Market Efficiency
  7. NPV and Other Investment Criteria
  8. Capital Budgeting
  9. Project Analysis and Evaluation     
  10. Realized versus Expected Returns
  11. Risk and Return - Diversification
  12. Risk and Return - CAPM
  13. Cost of Capital and Valuation
Learning outcomes

Upon completion of the course the student will be able to: 

  1. Determine the future and present value of investments with multiple cash flows;
  2. Analyze the determinants of bond price and volatility;
  3. Describe factors affecting bond yields and the term structure of interest rates;
  4. Explain how stock market prices are affected by dividends and dividend growth;
  5. Explain the importance of net present value in determining the value of an investment;
  6. Describe important determinants of project evaluation;
  7. Measure the expected return and risk of individual securities and portfolios.
  8. Utilize how the CAPM in portfolio analysis.
  9. Explain how to calculate a firm’s cost of debt and equity capital.
Means of assessment
Assignments:    0% - 20%
Term Tests:    0% - 20%
Midterm Exam:   20% - 40%
Final Exam:   30% - 40%
Total           100%
Textbook materials

Textbooks and Materials to be Purchased by Students

S. Ross, R. Westerfield, B. Jordon, and G. Roberts. Fundamentals of Corporate Finance. Latest Edition, McGraw-Hill Ryerson.

Prerequisites

Minimum grade of C in ECON 1150 and ECON 1250; and a minimum grade of C in MATH 1120 or 1125.