Principles of Finance Course

Develop your understanding of the rapidly evolving and exciting theory of finance

This Summer School course serves as an introduction to the core concepts in finance. You will learn the nature and workings of financial markets and their use by corporations, investors and others, and the relevance of theory for financial and investment decision making. You will acquire skills in modern valuation techniques, including the pricing of fixed-income securities, equities and derivatives.

Teaching methods

Teaching will take place on campus, in our multi-mode-enabled lecture theatres. The course will be taught in line with government COVID-19 guidance and restrictions for teaching. This may include social distancing and reduced capacity in lecture theatres. Should government guidelines be in place at the time limit or prevent on-campus teaching, we reserve the right to deliver some or all of the course fully online.

Assessment

• Multiple choice question quizzes – (30% of final mark)
• 1 final individual examination – (70% of final mark)

Imperial College London will issue an official transcript with a final overall numerical mark – a breakdown of results will not be provided.

Imperial College London reserves the right to change or alter the courses offered without notice.

By the end of the course, you will develop an understanding of:

• The basic principles of finance and finance theory; the time value of money, the notion of compound interest, the definition of the internal rate of return, the valuation of financial instruments and the perpetual growth model.
• How to apply the criteria that companies use to make investment decisions.
• The concepts of market efficiency, portfolio risk and diversification.
• The principal functions of capital markets.
• The distinct features of main financial instruments including debt, equity and financial derivatives.
• The general principles of the pricing and use of financial instruments.

Week one

You will review bonds and money markets and how to assess credit risk. You will cover equity valuation and the Dividend Growth Model. You will also cover important concepts such as the risk and return trade-off and financial markets’ efficiency. You will also learn about systematic and unsystematic risk and the Capital Asset Pricing Model.

Week two

You will cover important topics in corporate finance such as how to value companies and investment projects and how to calculate the cost of capital. You will learn about financial leverage and the concept of optimal capital structure and how changes in capital structure impact the value of firms.

Week three

You will learn about the derivative market and cover the mechanics of Futures contracts such as margin requirements. You will also cover Option contracts. You will learn about the payoffs of Calls and Puts and about trading strategies that involve these contracts.