Knowledge (upon completion of the course, the student shall):
Have perspective on the stock exchange as: an arena for acquisition of venture capital, a marketplace for the establishment of the market value of the company, and as a market for the pricing of risk
Know how to compute the main statistical concepts; expected value/mean/median, standard deviation and correlation
Know the concept of diversification and the reduction of risk exposure as a consequence of diversification
Understand portfolio theory
Know the consequences for investor of high/low gearing of the company and how the market value of the enterprise is affected by gearing
Be able to perform statistical analysis of stock data; using spreadsheets to calculate: expected return, standard deviation, correlation and β (beta)
Skills (upon completion of the course the student shall be able to):
Applying modern portfolio theory for finding optimal investment portfolios
Calculating prices of option contracts
Applying the CAPM to estimate the rate of return for investments
Establish risk-adjusted rate of return in investments
Calculating "financial figures" using spreadsheets
General competence (upon completion of the course the student shall be able to):
Implement and disseminate financial analysis and assessments for the business management
Be able to ask critical questions and reflect on crucial assumptions and theories within the field of corporate finance
The main purpose of the course is to show how the uncertainty in investment and financing projects can be analyzed. Based on analysis of the stock market and exchange rates, it is possible to say something about the risk the owner and investor is exposed to. One can also use the results of the analysis to establish risk-adjusted interest rates. These can be used in connection with investment analysis. The course further provides an introduction to risk assessment, risk reduction and risk balancing by presenting portfolio theory. We will also look at debt ratio issues and introduce options theory and application of options.
The following topics are included:
Uncertain projects and risk - seen from the investor perspective
Risk attitude and risk compensation
Basic statistics - the key factors in financial analysis: statistical expectation, standard
deviation and correlation
Portfolio theory and estimation of beta (β)
Diversification and reduction of risk – the portfolio effect
The capital asset pricing model (CAPM) with applications
Debt-equity ratio and risk
Risk analysis with the traditional models; sensitivity analysis, scenario analysis and decision tree
Financial gearing and risk
Corporate value and risk in perfect capital markets
Arbeids- og undervisningsformer
Lectures, problem solving, student presentations, individual and group work with mandatory hand-ins.
Obligatoriske krav som må være godkjent før eksamen kan avlegges
Mandatory hand-ins that must be passed in order to be allowed to take the exam. Specific form, number and other details will be announced during course start-up.
Four hours written exam under attendance.
(Eksamen må påregnes besvart på engelsk)
Tillatte hjelpemidler til eksamen
Calculator that meets the requirements for the use of calculator at the business education at Lillehammer University College. Updated guidelines are available and will be distributed at start-up each year.