1 COURSE OBJECTIVES
This 15 credit (half unit) course is compulsory for students majoring in accounting and/or finance
and optional for those on other
... [Show More] degrees, with AcF100 or AcF263 (or equivalent) being the
prerequisite. The course aims to describe the theory and practice of financial decision making to
cope with the practical financial problems that both firms and individuals are likely to confront.
More specifically, the course aims to provide the basics for project evaluation, introduce the
notion of risk, its role in investments and the methods to cope with it, and discuss how firms raise
funds to undertake their investments. To equip the students with the necessary tools for dealing
with such issues, this course focuses on the following subjects:
Capital investment appraisal techniques
The theory of risk, return and the cost of capital, including portfolio theory and the capital
asset pricing model (CAPM)
The efficient markets hypothesis (EMH) and an introduction to behavioural finance
Capital structure and payout policy
Option pricing theory: Introduction and selected applications
2 LEARNING OUTCOMES
At the end of the course, students should be able to:
Assess investment projects using capital budgeting techniques, and understand the problems
associated with applying such techniques in practice;
Understand the relationship between risk and required return and interpret the capital asset
pricing model;
Understand the concept and practical implications of market efficiency; be able to provide a
number of rational and behavioural explanations of selected market anomalies;
Interpret the determinants of a firm’s capital structure choice and payout policy;
Demonstrate payoffs of simple options, understand the binomial option pricing model, and
have introductory knowledge of the Black & Scholes option pricing model; be able to apply
basic option pricing techniques in the context of corporate finance and capital investment
decisions. [Show Less]