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MITx: Foundations of Modern Finance I

A mathematically rigorous framework to understand financial markets delivered with data-driven insights from MIT professors.

Foundations of Modern Finance I
12 weeks
10–14 hours per week
Instructor-paced
Instructor-led on a course schedule
Free
Optional upgrade available

There is one session available:

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Starts Sep 18
Ends Dec 18

About this course

Skip About this course

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.

At a glance

  • Institution: MITx
  • Subject: Economics & Finance
  • Level: Advanced
  • Prerequisites:
    • Basic Probability and Statistics;
    • Calculus
  • Language: English
  • Video Transcript: English
  • Associated programs:
  • Associated skills:Financial Analysis, Financial Market, Financial Services, Investments, Finance, Basic Math, Planning, Chartered Financial Analyst, Market Liquidity

What you'll learn

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  • Valuation of fixed income securities and common stocks
  • Risk analysis, the Arbitrage Pricing Theory (APT), and the Efficient Market Hypothesis
  • Introduction to corporate finance and capital budgeting
  • Valuation of derivative securities
  • Portfolio theory and the Capital Asset Pricing Model (CAPM)
  • Corporate financial decisions
    • Real options, capital structure, payout policy, corporate bonds; and
    • Interaction between investment and financing decisions

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

Who can take this course?

Unfortunately, learners residing in 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.

This course is part of Finance MicroMasters Program

Learn more 
Expert instruction
6 graduate-level courses
Instructor-led
Assignments and exams have specific due dates
1 year 4 months
10 - 14 hours per week

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