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Module Title LM Theory of Finance
SchoolBirmingham Business School
Department Birmingham Business School
Module Code 07 27008
Module Lead Giovanni Calice
Level Masters Level
Credits 20
Semester Semester 1
Pre-requisites
Co-requisites
Restrictions None
Contact Hours
Exclusions
Description This module is designed to introduce students to the fundamentals of financial markets, theories of asset pricing and the basic elements of a firm’s pay-out policy and capital structure. It will begin by presenting the main mathematical methods used in modelling financial relationships. There will be an examination of asset pricing under certainty, which forms the basis for determining the prices of fixed income securities. The focus of the module will then switch to individual decision making under uncertainty, which provides the foundation for modern portfolio theory and determining the prices of risky assets. Alternative asset pricing theories will be investigated, including the capital asset pricing model, arbitrage pricing theory and state preference theory.
Learning Outcomes By the end of the module students should be able to:
  • Demonstrate a systematic and critical understanding of how firms and individual investors evaluate investment projects, using rules regarding the time value of money;
  • Critically analyse the theoretical setup of the risk and return relationship of an investment decision and use this to price financial assets, for example equities and bonds;
  • Justify conclusions using appropriate methodological and financial arguments with appropriate rigour;
  • Apply advanced modelling techniques to the area of finance;
  • Evaluate critically the complexity and contradictions of the current academic literature and its implications for professional practice, and be able to identify key questions for their own research.
Assessment 27008-01 : Test : Class Test (20%)
27008-02 : Problem sets : Coursework (10%)
27008-03 : Exam : Exam (Centrally Timetabled) - Written Unseen (70%)
Assessment Methods & Exceptions Assessments: mid-module test (20%), group presentation (20%), 3-hour examination (60%).

Reassessment: 3-hour examination (100%).
Other
Reading List