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    FM212 Syllabus 2012-13

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    jackie.chan
    This document provides information about the FM212 Principles of Finance course at the London School of Economics, including: - The course is taught over two terms and covers both asset pricing theory in the first term and corporate finance theory in the second term. - Students receive weekly lectures and tutorial classes, and are expected to dedicate additional self-study hours each week. - The course textbook is Corporate Finance by Brealey, Myers and Allen. Students will be assessed through a single three-hour written exam consisting of questions covering both parts of the course.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    FM212 Syllabus 2012-13

    Uploaded by

    jackie.chan
    219 views5 pages
    This document provides information about the FM212 Principles of Finance course at the London School of Economics, including: - The course is taught over two terms and covers both asset pricing theory in the first term and corporate finance theory in the second term. - Students receive weekly lectures and tutorial classes, and are expected to dedicate additional self-study hours each week. - The course textbook is Corporate Finance by Brealey, Myers and Allen. Students will be assessed through a single three-hour written exam consisting of questions covering both parts of the course.

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    FM212 syllabus 2012-13

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    This document provides information about the FM212 Principles of Finance course at the London School of Economics, including: - The course is taught over two terms and covers both asset pricing theory in the first term and corporate finance theory in the second term. - Students receive weekly lectures and tutorial classes, and are expected to dedicate additional self-study hours each week. - The course textbook is Corporate Finance by Brealey, Myers and Allen. Students will be assessed through a single three-hour written exam consisting of questions covering both parts of the course.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    219 views5 pages

    FM212 Syllabus 2012-13

    Uploaded by

    jackie.chan
    This document provides information about the FM212 Principles of Finance course at the London School of Economics, including: - The course is taught over two terms and covers both asset pricing theory in the first term and corporate finance theory in the second term. - Students receive weekly lectures and tutorial classes, and are expected to dedicate additional self-study hours each week. - The course textbook is Corporate Finance by Brealey, Myers and Allen. Students will be assessed through a single three-hour written exam consisting of questions covering both parts of the course.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    The London School of Economics and Political Science

    Department of Finance
    FM212: Principles of Finance
    Lecturers:
    Professor Christopher Polk
    Professor Stavros Panageas
    Administration:
    Student Information Centre, OLD3.06
    Course Web-site
    FM212: Principles of Finance http://moodle.lse.ac.uk/
    Course Objectives:
    This course provides a rigorous survey and introduction to finance. The
    course is a prerequisite for more advanced finance courses. It also serves as
    a stand-alone course for students in other fields, such as economics or
    management, who do not intend to take any other finance courses.
    The course is divided in two parts. Part One of the course discusses portfolio
    choice and asset pricing theory. We introduce time discounting and the
    theory of present value. We discuss diversification theory and the impact of
    portfolio risk on asset pricing equilibrium. We separately discuss equity and
    fixed-income valuation. We discuss the theory of efficient capital markets.
    We present derivatives pricing theory in both discrete and continuous time,
    and apply it to the pricing of put and call options. We discuss forward and
    futures contracts and their use in hedging.
    Part Two of the course studies corporate finance theory. This is the theory of
    a firms decisions concerning capital budgeting (which investments to make),
    payout policy (how to return profits to shareholders), and capital structure
    (how to raise capital) as well as related decisions including risk management,
    mergers and acquisitions, and the decision to become a publicly-traded firm.
    We first examine these decisions in an idealized frictionless world in which
    the firm cannot change its value by altering its payout or capital structure
    policy. We then explore the effect of frictions (such as taxes, bankruptcy
    costs, inefficient or uncompetitive financial markets, and self-interested
    managers) on these firm decisions, and consequently on firm value.
    Learning and Teaching Delivery
    Students receive instruction in two forms:
    1. Two weekly one hour lectures covering formal material on the theory and
    institutional settings and reviews of the empirical literature, in asset pricing
    (Part One, in Michaelmas term) and corporate finance (Part Two in Lent
    Term)
    2. Weekly one hour tutorial-classes over both terms reviewing assigned
    problems and discussing results and applications of results of analyses
    reviewed in the lectures.
    In addition students are expected to set aside weekly periods (about 5 hours)
    of self-study to reflect on the lecture material, undertake the recommended
    readings and work on the assigned class exercises.

    Classes
    Classes for Part One of the course begin in the second week of Michaelmas
    term and end in the first week of Lent term (inclusive). Classes for Part Two
    begin in the second week of Lent term and end in the first week of Summer
    term (inclusive). Two class assignments per term will be graded by the class
    teachers, and although these do not count towards the course assessment,
    familiarity with the concepts and methods used in the classwork exercises is
    necessary to perform adequately on the final exam.
    Office Hours
    All class tutors are allocated office hours, and if you have any questions or
    problems with the course, in the first instance you should discuss these with
    your class tutor in the classes or in the class tutors office hours. Students
    may also contact the Student Information Centre in room OLD 3.06.
    Textbook
    The textbook for the course is Corporate Finance by Richard Brealey, Stewart
    Myers, and Franklin Allen, 10th edition, McGraw-Hill Inc.
    Web Resources:
    Lecture notes, class exercises, solutions and past exam papers can be
    accessed on the courses Moodle page.
    Solutions to class exercises will be made available in the weeks after the
    exercises have been scheduled
    Assessment
    The module is assessed 100% by a three hour written examination at the end
    of the course. This examination paper will consist of 6 questions: three in
    Section A (based on material covered in Part One) and three in Section B
    (based on material in Part Two), and students must answer two questions
    from each section. All questions will be given equal weight. Hand calculators
    only are allowed in this examination. Copies of past exam papers can be
    obtained from the website.

    FM212 Lecture Schedule


    Lectures take place on Fridays in the Peacock Lecture Theatre from 12-1pm and 23pm
    Part 1: Asset Pricing - Michaelmas Term (Professor Stavros Panageas)
    Week 1. Present Value
    Week 2. How to Calculate Present Values
    Week 3. Value of Bonds and Common Stocks
    Week 4. Risk, Return and the Cost of Capital
    Week 5. Portfolio Theory and Asset Pricing Equilibrium
    Week 6. The Six Lessons of Market Efficiency
    Week 7. Put and Call Options
    Week 8. Options Pricing Theory
    Week 9. Valuing Government Bonds
    Week 10. Forwards and Futures
    Part 2: Corporate Finance - Lent Term (Professor Christopher Polk)
    Week 1. Capital Budgeting and the NPV Rule
    Week 2. Real Options
    Week 3. Payout Policy
    Week 4. Does Debt Policy Matter?
    Week 5. How Much Should a Firm Borrow I
    Week 6. How Much Should a Firm Borrow II
    Week 7. The Many Different Types of Debt
    Week 8. Mergers, Corporate Governance and Control
    Week 9. Initial Public Offerings
    Week 10. Risk Management and Hedging

    FM212 Part 1, Class and Reading Schedule


    Class exercises due in a particular week typically depend on the previous weeks
    lecture and reading assignment, detailed below. Class exercises consist of three
    questions. Students should bring written answers to these questions to class. In
    weeks marked with an asterisk, students will be required to hand in to the class
    teacher a problem set for formative assessment.
    Reading Assignment

    Classwork Due
    Michaelmas Term

    Week 1.

    BMA, ch 2

    No class this week

    Week 2.

    BMA chs 2 and 3.5

    Part 1 Classwork #1

    Week 3.

    BMA chs 3.1 and 4

    Part 1 Classwork #2

    Week 4.

    BMA ch 7

    Part 1 Classwork #3

    Week 5.

    BMA ch 8

    Part 1 Classwork #4 *

    Week 6.

    BMA ch 13

    Part 1 Classwork #5

    Week 7.

    BMA ch 20

    Part 1 Classwork #6

    Week 8.

    BMA ch 21

    Part 1 Classwork #7

    Week 9.
    Week 10.

    BMA chs 3.2-3.4


    BMA chs 26-27, pp. 680-688, 706-715

    Part 1 Classwork #8 *
    Part 1 Classwork #9

    Lent Term

    Week 1.

    BMA, chs 5 and 6

    Part 1 Classwork #10

    Week 2.

    BMA chs 10.4 and 22,


    Dixit, Avinash and Robert Pindyck,
    1995, "The Options Approach to
    Capital Investment," Harvard Business
    Review May/June 1995, 105-115.

    Part 2 Classwork #1

    Week 3.

    BMA ch 16

    Part 2 Classwork #2

    Week 4.

    BMA chs 14.3, 17, 19.4

    Part 2 Classwork #3

    Week 5.

    BMA ch 18, pp. 468-487

    Part 2 Classwork #4*

    Week 6.

    BMA ch 18, pp. 488-493

    Part 2 Classwork #5

    Week 7.

    BMA ch 24

    Part 2 Classwork #6

    Week 8.

    BMA ch 31
    Jensen, Michael, 1986, "Agency
    Costs of Free Cash Flow,

    Part 2 Classwork #7

    Corporate Finance, and


    Takeovers," American Economic
    Review 76, 323-329.
    Week 9.

    BMA ch 15

    Part 2 Classwork #8*

    Week 10.

    BMA ch 26
    Froot, Kenneth, David Scharfstein,
    and Jeremy Stein, 1994, "A
    Framework for Risk Management,"
    Harvard Business Review
    November/December 1994, 91102.

    Part 2 Classwork #9

    Summer Term

    Week 1.

    None

    Part 2 Classwork #10

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