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Foundations of Modern Finance I

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

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Foundations of Modern Finance  I

There is one session available:

67,965 already enrolled!
Starts Sep 20, 2023
Ends Dec 18, 2023

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:

67,965 already enrolled! After a course session ends, it will be archivedOpens in a new tab.
Starts Sep 20, 2023
Ends Dec 18, 2023

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:

What you'll learn

Skip What you'll learn
  • 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

About the instructors

Who can take this course?

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