Course Description

Welcome to "Foundations of Modern Finance II," an advanced-level course offered by MITx as part of their MicroMasters® Program in Finance. This course is designed to equip you with the cutting-edge knowledge and skills needed to make crucial financial decisions under uncertainty in the business world.

Building upon the core principles established in Foundations of Modern Finance I, this course delves deeper into the intricate world of financial decision-making. You'll explore the fascinating realm of financial derivative securities, uncover the complexities of capital structure decisions, and learn how to navigate the delicate balance between investing and financing.

At the heart of this course lies the art and science of valuation. You'll develop powerful models and analytics to measure risk and value financial assets with precision. These tools will empower you to make informed decisions about business investments, fairly price financial assets, and excel in project valuation and capital budgeting.

What Students Will Learn

• Valuation techniques for futures, forwards, and options
• Portfolio optimization strategies
• In-depth understanding of the Capital Asset Pricing Model (CAPM)
• Mastery of capital structure decisions within firms
• Comprehensive grasp of the interplay between investing and financing
• Advanced risk measurement and financial asset valuation models
• Application of valuation models to stocks, bonds, and projects

Prerequisites

• Completion of 15.415.1x Foundations of Modern Finance I
• Strong background in undergraduate-level Probability and Statistics
• Proficiency in undergraduate-level Calculus
• Solid understanding of undergraduate-level Linear Algebra

Course Coverage

• Forwards and Futures: Understanding and valuing these derivative contracts
• Options: Exploring various option types and their valuation models
• Portfolio Theory: Optimizing investment portfolios for maximum returns
• Capital Asset Pricing Model (CAPM): Applying this fundamental model to real-world scenarios
• Capital Budgeting and Real Options: Making informed investment decisions
• Financing and Capital Structure: Determining optimal financing strategies for firms
• Interaction between Investing and Financing: Balancing these crucial aspects of financial management
• Payout and Risk Management: Strategies for managing financial risks and returns

Target Audience

This course is ideal for:

• Finance professionals seeking to enhance their skills and knowledge
• Business leaders aiming to make more informed financial decisions
• Aspiring financial analysts and consultants
• Students pursuing advanced degrees in finance or business
• Anyone looking to gain a deeper understanding of modern finance principles and their practical applications

Real-World Applications

The skills acquired in this course have immediate and far-reaching applications in the real world:

• Financial analysts can apply these valuation techniques to assess investment opportunities accurately
• Portfolio managers can optimize their clients' investments for better risk-adjusted returns
• Corporate finance professionals can make informed decisions about capital structure and financing
• Risk managers can develop more effective strategies for measuring and mitigating financial risks
• Entrepreneurs can better understand the financial implications of their business decisions
• Personal investors can make more informed choices about their own financial portfolios

Syllabus

1. Forwards and Futures
2. Options
3. Portfolio Theory
4. Capital Asset Pricing Model (CAPM)
5. Capital Budgeting and Real Options
6. Financing/Capital Structure
7. Interaction between Investing and Financing
8. Payout and Risk Management

Conclusion

By mastering the concepts in this course, you'll be equipped with the knowledge and skills to excel in the dynamic world of modern finance, whether you're aiming to advance your career, make better business decisions, or simply gain a deeper understanding of financial markets and decision-making processes.