Cash Flows and Fixed income securities: Investments and markets - Principal and
interest - Present and future values of streams - IRR. Fixed income securities -
Market value for future cash - Bond value - Bond details – Yields – Convexity –
Duration - Immunization. Bond portfolio management - Level of market interest
rates, Term structure of interest-rate theories.
Stocks and Derivatives: Common stock valuation - Present value of cash dividends
- Earnings approach - Value versus price - Efficient markets theory - Technical
analysis. Analysis of financial statements. Derivatives - futures and options -
Black Scholes formula - Utility functions - Applications in financial decision making.
Portfolio analysis and capital market theory: Covariance of returns – Correlation -
Portfolio return - Portfolio standard deviation - Two asset case - Efficient frontier
- Optimum portfolio. Capital market theory- Capital market line - Sample
diversifications to reduce risk - Characteristic line - Capital asset pricing model.
Arbitrage price theory - Stock performance evaluation.