Introduction to Finance

Introduction to Finance
Nisan Langberg
Office 210E
Teaching Assistant
PJ Pritzker
Equip students with the basic tools necessary for
making efficient financial decisions while taking
into account future cash flows and their risk.
Students will master the required theoretical
tools and apply them to day-to-day decision of
individuals (saving/retirement/mortgage…)
• Logistics
• Course schedule
Class Material
On our website
Text book
I will teach and assign problems using the book
Corporate Finance by Jonathan Berk and Peter
DeMarzo, Perason
Alternative Reading
Further/alternative reading is Brealey, Myers and
Allen, Principals of Corporate Finance, McGraw-Hill
Irwin, 8th edition or higher
Buying the book?
I do recommend buying the book
• The course is built around the text book
• Excellent reference book for those to plan to
work in the area of corporate finance
• Taught in leading B schools around the world
Group Assignments
• I encourage work in groups
• Groups are limited to four students
• Homework assignments: 30%
• Final exam: 70%
Office hours
• appointment by email
• welcome to stop by my office
• Send specific questions by email
Course Schedule
Course schedule
Wednesday and Thursday classes
August 27/28
September 3/4
Time value of money
(chapters 3.1-3.3 and 4)
• Future value
• present value
• discounting stream of
cash flows
Time value of money
• Annuities, perpetuities,
growing annuities and
growing perpetuities
• Saving for retirement
• Mortgage
Course schedule
September 10/11
Review of Time value of money
with TA
• Review of basic discounting
• Solution of homework
questions in class
• Additional advanced
practice questions
Practice questions CH3,4 due
September 17/18
Interest rates (chapter 5)
• APR, EAR, Amortizing loans
• Nominal and Real interest
• The Term Structure of
Interest Rates
Basics of Bond Valuation
(chapter 6)
• Type of bonds
• Structure of bonds
• valuation
Course schedule
September 24/25
Investment Decision Rules
(chapter 7)
• NPV, Payback period,
• Multiple investment
• Resource constraints,
Profitability Index
Practice Questions CH5/6
October 1/2
Stock Valuation (chapter 9)
• Investing in stocks
• The Constant Dividend
Growth model
• The dividend and growth
• Changing growth rates
• Application: ebay
Practice questions CH7 due
Course schedule
October 8/9
Pricing Risk (chapter 10)
• Risk and return
• Expected return, Volatility
• Calculating realized returns
• Excess returns
• Systematic and Idiosyncratic risk
• Diversification
Practice questions CH9 due
October 11
Make up class
(Saturday) 9:00-12:00
October 15/16
Final 6:00-9:00
Questions before we start?