AU kursuskatalog arkiv

2310: Finance and Investments ( efterår 2011 - 10 ECTS )

Rammer for udbud

• Uddannelsessprog: dansk
• Niveau: Compulsory course for 3rd sem. BSc Oecon. and 3rd sem. Bus. Adm. Subsidiary subject (SAM) and 5th sem. Bus. Adm. subsidiary subject (HUM/NAT) Elective course for 3rd sem. Bus. Adm. main subject (with course no. 4099).
• Semester/kvarter: Fall 2011
• Timer per uge: 2 lectures and 4 exercises for 14 weeks. Timetables can be found at: http://econ.au.dk/studies/teaching-and-examination/teaching/timetables/
• Deltagerbegrænsning:
• Undervisningssted: Århus
• Hovedområde: Det Samfundsvidenskabelige Fakultet
• Udbud ID: 28779

Formål

LEARNING OBJECTIVES:

The goals are that the student - after having followed the course activities in Finance and Investments - can

• Explain and apply basic financial mathematics: Simple interest, compound interest, annual percentage rates, net present value, internal rate of return, yearly payments
• Explain the logic foundation behind the net present value criteria
• Explain and apply methods of finding the after-tax cash flow of an investment
• Explain and apply methods used to evaluate the profitability of a single investment..
• Explain and apply methods to find the most profitable of several mutually exclusively investments
• Explain and apply methods used to find the optimal lifetime of an investment
• Explain and apply methods used to find the optimal replacement time of an investment
• Apply relevant sensitivity analysis in order to evaluate the risks of an investment
• Describe the conditions on the Danish money and fixed income market and apply computation of the interest and repayment schedules for the classical bond types.
• Describe and explain the workings of the Danish mortgage market.

• Describe the international market for debt financing.

• Explain what a share issue (including an initial public offering) is, how it takes place, and potential problems in relation to share issues.

• Apply computations of the expected return and the variance of the return for portfolios composed of risky assets. Describe the possible combinations of the expected return and the variance of the return in a diagram. Argue what the compositions of the important portfolios are.
• Argue for what the expected return of a given asset ought to be in the Capital Asset Pricing Model (CAPM). Argue for estimation of the data/parameters used in these methods. Explain the empirical problems in relation to CAPM.
• For multi factor models you can explain the computation of the expected return and the variance of the return for portfolios and the covariance of the returns among different portfolios. Explain the composition of a portfolio such that the return of this portfolio only depends on a single factor, a pure factor portfolio. Based on such pure factor portfolios you can explain the computation of what the expected return of a given asset/share ought to be according to the Arbitrage Pricing Theory (APT). Finally, you can explain data and empirical problems in relation to the APT.

 All calculations are done by means of a spread sheet.

Indhold

COURSE DESCRIPTION: The first part of the course treats computation of interest and capital budgeting founded on the classical capital budgeting theory. The student is able to analyze and solve practical capital budgeting problems. In the fixed income part of the course the classical loans are studied. In the equity part of the course share offerings, including initial public offerings, are treated. The pricing of shares is introduced by means of the mean-variance model, the capital asset pricing model, and the arbitrage pricing model.

COURSE SUBJECT AREAS:

1. Brush up course in mathematics including sums, interest rate series, variance, covariance, and basic matrix algebra

2. Financial mathematics

3. Capital budgeting

4. Bond and term structure analysis

5. Share issues, including initial public offerings

6. Pricing of risky assets by means of me­an-variance theory, CAPM, and APT

Faglige forudsætninger

REQUIRED COURSES (progression):

BSc students : Introduction to Statistics and IT (1st semester), Introduction to Economics and Management (1st semester), Principles of Economics (1st semester), Macroeconomics, Mathematics and Statistics (2nd semester), Accounting (2nd semester).

BA students : Introduction to Statistics and IT (1st semester), Introduction to Economics and Management (1st semester), Principles of Economics (1st semester), Applied Statistics (2nd semester), Accounting (2nd semester).

Underviser

LECTURER: Charlotte Christiansen

Undervisnings- og arbejdsform

TEACHING METHOD: Lectures and exercises.

TEACHING LANGUAGE: Danish

Litteratur

LITERATURE:

1. Peter Ove Christensen og Bjarne Graabech Sørensen: Rentesregning, Odense Universitetsforlag 2001 (approximately 90 pages).
2. Peter Ove Christensen og Bjarne Graabech Sørensen: Investeringsteori, Odense Universitetsforlag 2001 (Approximately 170 pages).
3. Christian Riis Flor & Claus Munk: Indledende obligations og rentestrukturanalyse, Syddansk Universi­tet, 2010 (Approximately 110 pages).
4. Mark Grinblatt og Sheridan Titman: Financial Markets and Corporate Strategy, Mc GrawHill, European edition 2008 (chapter 1, 2, 3, 4, 5 og 6. Approximately 180 pages).
5. Notes (approximately 20 pages).

In total approximately 600 pages.

Bedømmelse

FORM OF ASSESSMENT: Written PC-exam (6 hours)

EXAMINATION AIDS ALLOWED: All incl. PCs, except for any means of electronic communication or internet access.