Syllabus academic year 2011/2012
(Created 2011-09-01.)
FINANCIAL MANAGEMENTEXTF45
Credits: 6. Grading scale: TH. Cycle: G2 (First Cycle). Main field: Technology. Language of instruction: The course will be given in Swedish. EXTF45 overlaps following cours/es: MIO140. Compulsory for: I3, Pi4fm. Optional for: M4, Pi4. Course coordinator: Karl Larsson, karl.larsson@nek.lu.se, Department of Economics. Prerequisites: MIO040 Managerial Economics, Advanced Course. Assessment: There is a written exam at the end of the course. To pass the course, students must pass both the exam and the laboratory assignments. It is compulsory to be present at the laboratory sessions and to hand in a report for evalutation. If it is doubtful whether the laboratory report is sufficient to pass, students are allowed to correct their report and hand it in for renewed evaluation. Laboratory reports can only be handed in in connection to the course and the re-exams. Home page: http://www.nek.lu.se.

Aim
The aim ofn the course is to give a generel introduction to the subject of financial economics, from a company perspective by studying corporate finance using financial assets and from a market perspective by creating an understanding for the functioning of financial markets and the pricing and risk management of financial assets. The course provides two perspectives on on finance, the perspective of the financier and the perspective of the borrower. The structure of the copurse is divided in terms of financial instruments and focus both on valuation of risky assets and on valuation of fixed income securities.

Knowledge and understanding
For a passing grade the student must

have knowledge and an understanding of:

relevant concepts and models

rate of return and risk premia for shares and share portfolios

capital budgeting

the choice of capital structure and how it affects the value of the company

pricing of options

dividends and the value of a company

the pricing of fixed income securities inlcluding interest rate risk

the financing on global markets including exchange rate risk and various instruments

Skills and abilities
For a passing grade the student must

be able to:

calculate payoff and the rate of return on shares

calculate the cost of capital

choose among and calculate various capital structures in companies and organisations, particularly regarding investment decisions

determine the choice of capital structure for investments in different capital markets

decide dividends to company owners and its effect on the value of the company

understand and price options

calculate the relations among interest rates of different duration and calculate interest rate risk

use data to describe the connection between the national money market and the currency trade

Judgement and approach
For a passing grade the student must

be able to use established terminology and in a clear and concise manner communicate the forulation of problems, their solution and interpretation of quantitative models. After the course, students shall be able to independently seek and evaluate literature in the field.

Contents
The course consists of two parts and eight segments:

1. valuation of risky assets

a. risk, rate of return and portfolio selection

b. capital budgeting

c. efficient markets

d. dividends, capital structure and options

2. valuation of fixed income securities

a. pricing and interest rates

b. risk management

c. global markets and the currency market

d. various instruments

Literature
Berk, J. & DeMarzo, P.: Corporate Finance plus MyFinanceLab. 2nd edition, Pearson Addison Wesley, Boston 2010