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Massachusetts Institute of Technology

Foundations of Modern Finance I

Massachusetts Institute of Technology via edX

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Overview

This is a two-part course, and part of the MicroMasters® Program in Finance. It provides a rigorous and comprehensive introduction to the fundamentals of modern finance and their applications to business challenges in valuation, investments, and corporate financial decisions under a unified framework.

Completing this first course and program will help you prepare for a career as a financial analyst, financial advisor, vice president for finance, chief financial officer, and more.

Finance provides a core function in any productive economy by providing a mechanism for savings, investment, and liquidity. Whether the learner is in a industrialized country or a developing country, financial services are essential for smooth functioning of the economy.

Syllabus

Introduction to Finance

  • Financial decisions of households and corporations
  • Approaches to valuing financial and real assets
  • The role and the overview of financial markets
  • Financial Frictions
  • Unifying principles of finance

Market Prices and Present Value

  • State-space model for time and risk
  • Security prices, state prices and arbitrage pricing
  • Present Value (PV) and future value
  • Discount rates, time value and risk premium: a historic perspective
  • Compound interest
  • Annuity and perpetuity formulas

Fixed Income Securities

  • Fixed-income markets
  • Term structure of interest rates
  • Properties of bond prices and market conventions
  • Inflation and real rates

Common Stocks

  • Discounted Cash Flow (DCF) model
  • Gordon model, multi-stage growth model
  • EPS, P/E, PVGO

Risk

  • Decision under uncertainty and expected utility theory
  • Risk aversion
  • Diversification and portfolio analytics
  • Systematic and idiosyncratic risks

Factor models and Arbitrage Pricing Theory (APT)

  • Factor models for risk
  • APT
  • Applications of APT

Market Efficiency

  • Efficient Market Hypothesis (EMH)
  • Implications of EMH
  • Empirical evidence on EMH

Introduction to Corporate Finance

  • Corporate financial decisions
  • Opportunity cost of capital and NPV
  • Financial objective of corporate managers

Capital Budgeting

  • NPV rules
  • Cash flow calculations
  • Alternatives to NPV
  • Project interactions
  • Capital budgeting and discount rates

Taught by

Leonid Kogan and Jiang Wang

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Reviews

3.5 rating, based on 2 Class Central reviews

Start your review of Foundations of Modern Finance I

  • Anonymous
    Don't be fooled by the word "Foundation". It is a Master level at MIT. If you are an average person and/or have little background, you will learn but you will suffer and fail the class.
    You have 1 exam that worth 90% of your grade. The exam is time-constraint and very difficult. You are only allowed a blank excel sheet, basic on-screen calculator, and blank paper (NO physical calculator). It means expert Excel-level and expert understanding of finance is needed to ace the exam.
    This is a terrible course for financial exposure. It is clearly made for weeding and selecting only experts or geniuses. The thing is if you can handle the course, there is really no need for you to take this.
  • Anonymous
    It was so integrated and equpped with modern tools which can be apply in Industry and academia. Instructor delivery approach was modern and chalked out with modern techniqes.specially i liked most weekly assignment which were great prectice for learner.
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