Financial Arts
KING’S COLLEGE
BISHESH BAJRACHARYA
About me
Contact email- Bbbajracharya7@gmail.com
About this course
Finance is not only about playing numbers. Understanding markets and
the sentiments of different investors and how they perceive different
opportunities is a vital part.
The course doesn’t prepare you to become a financial analyst but
rather tries to teach you the different mechanisms in finance for you to
make informed financial decisions.
Thus we will not only discuss quantitative aspects but also the
qualitative nature of finance. You can call it a broader investments
course or an entrepreneurial finance course.
60% core finance – 40% Financial Philosophy
Course structure and what is
expected from you
Reference books

Grading Structure

40% class participation

30% attendance

20% pop quiz

10% Time value of Money Project
- Quizzes will be based on simple topics of the class lecture
-
No need to memorize anything but understand the underlying
meanings, concepts and how they are connected to each other
-
Class participation really matters-–Challenge me
Course Structure

6 weeks- 2 classes a week

Monday investments

Thursday Valuations
Investment
Decisions
Week 5


Investments- analyzing a company or
asset from the outside to see potential
opportunities. A look from the outsidein.
Evaluation metrics and what they
mean for Investors and investees
Week 3
Valuations- what gives an investment
its value? A look from the inside-out.
Investments
Week1
Valuations
What is finance ?
What is Finance ?
Typical dictionary definition – “management of money through
activities of investing, borrowing, lending, budgeting, saving and
forecasting “
-
This is definitely true, but ultimately what are they doing ? What is the
core of finance?
-
It’s the process of maximizing RISK ADJUSTED RETURNS
Risk, Return and Investments

Rs 1000 bet

If you win= 1000 +1000 , probability= 47.37%

If you lose= 0, probability= 52.63%

Risk adjusted value of this play = (2000*0.4737)+(0*0.5263) =947.4

A Gambler might have a high return, but will consistently have a low risk adjusted return.

So are the words gambler and investor synonymous?
Ever heard of the saying “The house always wins?”
But in the practical business world
can we really quantify all risks and
measure their exact returns?

The risk of the COVID-19 pandemic on future earnings of a company ?

How do you quantify the risk or the probability of returns a new CEO brings
to a company?

There are different renowned metrics used to quantify such thing.
However the answers differ with the alterations in variables. And these
variables are subjective.

So if it’s subjective is it really a science?

The metrics used to quantify the risks and returns is a science

But analyzing the subjectivity and using it to take calculated risks is an Art
Welcome to the
class on Financial
Arts!
Week 1- Class 1
Brief Intro to Investments &
Valuations
Investments
Types of investment Assets
Understanding
Equities/Stocks/shares

A share is an indivisible unit of capital, expressing the ownership
relationship between the company and the shareholder.
Sole proprietorship
Partnership
Corporation
Business owner
Single owner
Partners
Shareholders
Owner’s liability
Unlimited
Unlimited
Limited
Easy access to capital
market?
No
No
Yes
Is management and
ownership separate?
No
No
Yes
Are business owners
exposed to double
taxation?
No
No
Yes
Private limited
corporations/
companies
Public limited
Corporations/
companies
Easy access to capital
market?
Yes
Tradable in the stock
market
No
Yes
Liquid asset
No
Yes
Max Amount of
Shareholders
200
Unlimited
Reporting Regulations
Comparatively loose
Strictly monitored
Nepal- SEBON
US- SEC
Accounting information
Undisclosed to public
Public information
Dividends
Dividends and capital
gains
Shareholder
compensations
Even more so
2200x
Ways of engaging in Equity markets

Day Trading

Swing trading

Investing
Extra
Bonds, Treasury bills, & Debentures

A bond is a fixed income instrument that represents a loan made by an
investor to a borrower. It is in the form of a contract. Investors are rewarded
through Interest payments.

Basic type of bonds 1. Government Bonds 2. Corporate bonds

The difference- the borrower and thus the resulting risk and reward

Treasury bills- Similar to government bonds but have an expiration of one
year or less- known to be the least risky investment –RISK FREE RATE

Nepal’s avg Treasury bill -3.1%
US avg Treasury bill- 0.3%
Corporate bonds

Issued by corporations, riskier then government bonds

Interest on bonds depend on the credit rating of bonds

Secondary bond market isn’t prevalent in the Nepalese market

2 years ago the central bank issued debentures

Debentures also known as revenue bonds- not backed by the assets
of the issuer, rather just future revenues