About this courseSkip About this course
Due to challenges arising from the COVID-19 pandemic, start dates for the MITx MicroMasters® Program in Finance courses have been postponed until Fall 2020.
Please note: the dates listed for each course are tentative and subject to change. If we make any further changes to the program schedule, we will share this information with you via email, and make it available on our website.
Many of the most important financial decisions in business are done under uncertainty. This is the second course in the Foundations of Modern Finance series of courses, as part of the MicroMasters® Program in Finance. It provides you with the science behind making financial decisions under uncertainty.
We build on the core set of basic principles taught in the first part, and continue to develop a powerful and general framework for making financial decisions in business and in personal financial planning. We introduce financial derivative securities, and their valuation models, discuss the capital structure decision of firms, and explore the interaction between investing and financing.
At the center of financial decision making is the valuation problem. How much value does a business investment create? What is a fair price to pay for a financial asset? We develop models and analytics for measuring risk and for valuing financial assets. We apply valuation models to financial securities, including stocks and bonds, and to project valuation and capital budgeting.
The course is excellent preparation for anyone planning to take the CFA exams.
What you'll learnSkip What you'll learn
- Valuation of futures, forward, and options
- Portfolio optimization and the capital asset pricing model (CAPM)
- Capital structure decisions within the firm
- The interaction between investing and financing
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
- Historic returns on asset classes: return and risk
- 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
- 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
- Discounted Cash Flow (DCF) model
- Gordon model, multi-stage growth model
- EPS, P/E, PVGO
- 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
- Applications of APT
- 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
- NPV rules
- Cash flow calculations
- Alternatives to NPV
- Project interactions
- Capital budgeting and discount rates
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Who can take this course?
Unfortunately, learners from one or more of the following countries or regions will not be able to register for this course: Iran, Cuba and the Crimea region of Ukraine. While edX has sought licenses from the U.S. Office of Foreign Assets Control (OFAC) to offer our courses to learners in these countries and regions, the licenses we have received are not broad enough to allow us to offer this course in all locations. EdX truly regrets that U.S. sanctions prevent us from offering all of our courses to everyone, no matter where they live.