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.
- Overview of Corporate Finance and Financial Statements
- Valuation of Future Cash Flows
- Discounted Cash Flow Valuation
- Interest Rates and Bond Valuation
- Stock Valuation
- Market Efficiency
- NPV and Other Investment Criteria
- Capital Budgeting
- Project Analysis and Evaluation
- Realized versus Expected Returns
- Risk and Return - Diversification
- Risk and Return - CAPM
- Cost of Capital and Valuation
Methods of Instruction
Lecture and discussion.
Means of Assessment
|| 0% - 20%
|| 0% - 20%
|| 20% - 40%
|| 30% - 40%
Upon completion of the course the student will be able to:
- Determine the future and present value of investments with multiple cash flows;
- Analyze the determinants of bond price and volatility;
- Describe factors affecting bond yields and the term structure of interest rates;
- Explain how stock market prices are affected by dividends and dividend growth;
- Explain the importance of net present value in determining the value of an investment;
- Describe important determinants of project evaluation;
- Measure the expected return and risk of individual securities and portfolios.
- Utilize how the CAPM in portfolio analysis.
- Explain how to calculate a firm’s cost of debt and equity capital.
Minimum grade of C in ECON 1150 and ECON 1250; and a minimum grade of C in MATH 1120 or 1125.
Course Guidelines for previous years are viewable by selecting the version desired. If you took this course and do not see a listing for the starting semester/year of the course, consider the previous version as the applicable version.
Below shows how this course and its credits transfer within the BC transfer system.
A course is considered university-transferable (UT) if it transfers to at least one of the five research universities in British Columbia: University of British Columbia; University of British Columbia-Okanagan; Simon Fraser University; University of Victoria; and the University of Northern British Columbia.
For more information on transfer visit the BC Transfer Guide and BCCAT websites.
If your course prerequisites indicate that you need an assessment, please see our Assessment page for more information.