Introduction

This introductory focuses on acquiring basic skills in mathematical finance and analysis of net present value related to firms' real investments. Moving from an economic environment characterized by complete certainty with respect to the relevant decision variables, the analysis subsequently extends to incorporate uncertainty (risk) and how uncertainty affects the required rate of return on real-investment projects. Since the required rte of return emanates as an alternative cost of capital in well-functioning markets, the course also provides a brief introduction to capital market theory.

Course content

  • Introduction: Brief overview of main topics and general role ans relevance in modern managerial economics. 
  • The basic tools of financial mathematics
  • Models of profitability and use of decison criteria when applying the net present value principle, the internal rate of return and payback models.
  • Portfolio diversification and estimation of relevant risk.
  • Capital asset pricing model to estimate the risk-adjusted, required rate of return.

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.