Introduction to Financial Economics

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

Methods of Instruction

Lecture and discussion.

Means of Assessment

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.

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

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.