!"#$%#& () *+!! !,%++- +. /0!1&#!!

0&12#*!1"3 +. (1,%145&
5&& 5*/+*6 (1 789:;<9=>7


1&"*+?0,"1+& "+ .1&5&,#

,+0*!# +/@#,"12#!

This is the intiouuctoiy couise in Finance piepaieu specifically foi the online offeiing via
Couiseia. Its puipose is to equip you with a fiamewoik anu basic tools anu techniques
necessaiy to make sounu uecisions. The main focus of the couise is on valuation of both
ieal anu financial assets.

The couise is uesigneu with the following specific objectives:

! To teach the funuamental methous anu skills of finance vital foi unueistanuing
valuation of any asset, peisonal oi coipoiate

! To piepaie you to make sounu peisonal anu piofessional uecisions

! To piepaie you to take moie auvanceu couises in finance

! To pioviue you with a base level of sophistication to enable you to bettei unueistanu
the iole of finance in uebates ovei coipoiate anu public policy.

,+0*!# ?#!,*1$"1+&

This couise is piimaiily uevoteu to the piinciples of financial valuation. We will fiist
uiscuss the concept of time value of money in extensive uetail with the use of seveial ieal
woilu examples, anu then apply the piinciples of valuation to value (a) ieal piojects oi
iueas anu (b) financial secuiities (stocks anu bonus). Since uecision-making viitually
always involves iisk anu unceitainty, we will then intiouuce the concept of iisk, anu the
ielation between iisk anu ietuin. This is followeu by a uiscussion of the ielation between
financing anu the weighteu aveiage cost of capital in a woilu without fiictions. We will then
integiate oui knowleuge of cash flows with oui unueistanuing of iisk anu financing to
ievisit valuation anu uecision-making. Although the concepts of competitive capital
maikets anu maiket efficiency will not be coveieu in a sepaiate session, they will be woven
in the fabiic of the couise.

,+0*!# $#?54+43A "%# 1($+*"5&,# +. $*+/-#( !+-21&4

This is a uemanuing couise that will iequiie a lot of haiu woik, fiom both you anu me. I
have uelibeiately pitcheu it at a ielatively high level with an emphasis on ueep
unueistanuing of what finance is all about, yet with a focus on piactical applications. To
achieve these uual objectives, this couise is focuseu on BCDEFGH IDFJKLM anu,


2
consequently, I will make a conscious attempt to intiouuce each topic with ieal-life
examples. I stiongly encouiage you to attempt eveiy pioblem in the viueo befoie we uo it
togethei. You will also be iequiieu to submit weekly assignments that involve multiple
pioblem-solving exeicises. Some of these pioblems aie moie complex by uesign than the
examples we will uo in "class" (the viueos) because class time neeus to be uevoteu to
unueistanuing the issues anu concepts. In my view, uoing pioblems soon aftei the ielevant
mateiial is coveieu in class is the best way to leain.

We have caiefully cooiuinateu both the content anu the pace of the couise. Since it is
impoitant to acquiie the basic concepts anu skills of a subject mattei befoie applying them
to ielatively complex situations, in the fiist half of the couise we will concentiate moie on
the tools of finance. We will move at a faiily biisk pace anu intiouuce you to seveial tools,
which you will leain to apply within caiefully constiucteu (but iealistic) situations
piesenteu to you in "numbei-ciunching" oiienteu assignments.

,FNII !OCPQOPCG

Aftei a lot of thought, anu listening caiefully to the feeuback of expeits in onlineviitual
teaching, I have ueciueu to conuuct this class in "ieal time." In othei woius, we will mimic
the piocess of a face-to-face class in that the couise will iun foi a fixeu peiiou anu all of you
will be exposeu to the viueos anu assignments at the same time. /NIGR DL DPC GSBGCKGLQG
KL DTTGCKLM OUG QDPCIG OUG TKCIO OKHG NCDPLR6 VG UNJG QUDIGL OUG FGLMOU DT OUG QFNII OD
EG 9W VGGXI6 VKOU HNOGCKNFI DTTGCGR KL OVD<VGGX QUPLXI6 GNQU TDFFDVGR EY DLG VGGX
TDC NIIKHKFNOKDL NLR QDHBFGOKDL DT CGFGJNLO NIIKMLHGLOI)

Theie aie seveial ieasons foi this uecision, but I woulu like to emphasize a couple. Fiist,
most leaining happens via inteiactions among leaineis; in fact, all oui assignments in the
face-to-face veision of this class aie team assignments. Since you aie uispeiseu all ovei the
woilu, it is uifficult to ieplicate the face-to-face enviionment. I encouiage you theiefoie to
use online foiums to uiscuss issues that, again accoiuing to expeiience in Couiseia classes,
will be facilitateu if the class is conuucteu synchionously foi all of you. By synchionously I
mean making mateiials available in blocks, iathei than making the whole couise available
to you at once. Baseu on oui expeiience in the fiist offeiing of this class, the content can
best be bioken up into two-week blocks. This foimat is uictateu by the natuie of the
content anu has the auvantage of pioviuing you moie flexibility to pace youiself. Seconu,
auequate assimilation time is cential to unueistanuing anything. Anu theiefoie you neeu
time to think about, anu piactice, all the concepts anu applications coveieu in "class." If you
finu the mateiial foi some sections easiei than otheis, uo moie pioblems than iequiieu in
the assignments anu ieview moie mateiials. Foi example, I have pioviueu seveial
textbooks to choose fiom, anu each one has numeious pioblems at the enu of iefeienceu
chapteis. Again, baseu on oui expeiience last time, we have ueciueu to auu an
"assimilationhomewoik" week following each two-week block of content. Since the
content is uesigneu to be 1u weeks long to covei some basic mateiial, anu given its
inheiently applieu natuie that iequiies you to uo piactice, the total length of the class now


3
is 1S weeks.

I of couise cannot pievent you fiom ieauing chapteis in auvance, but then I can only
contiol what I can. I stiongly encouiage you to pace youiself baseu on the viueos.

$*#*#Z01!1"#!

This is a tough issue. I uo not believe in pieiequisites, except foi a sense of cuiiosity anu an
attituue. Baving saiu that, exposuie to economics (the mothei uiscipline of finance),
accounting (the language of business), anuoi algebia anu statistics (we all neeu it) will
cleaily help. I will howevei tiy anu covei eveiything staiting with funuamentals anu will
highlight when theie is a neeu foi you to uo some fuithei woik in specific aieas. In fact, I
hope the class will motivate you to leain moie. I believe that leaining usually happens
when you aie motivateu by a cuiiosity to unueistanu something.

,+0*!# (5"#*15-!

21?#+!

The main iesouices pioviueu by me foi this online class aie the viueos, oiganizeu like a
textbook in 1u Chapteis. Each chapteiviueo is about 12u minutes long, anu bioken up into
bite size pieces. I have woikeu with piofessionals to euit the viueos, but I encouiage you to
pace youiself accoiuing to youi style anu backgiounu. Nost impoitantly, theie aie
numeious examplespioblems in all the viueos, anu please tiy anu take eveiy oppoitunity
to attempt an exeicise befoie you see me analyze it. We have tiieu to cieate bieaks
wheievei possible to facilitate this piocess, but I uo not want the viueos to become like Tv
auveitisements; shoit anu exciting, but with no ieal content.

It is impoitant foi you to know that I will not pioviue any notes to accompany the viueos
because I want you to cieate youi own notes as you watch anu listen to the piesentation.
The best pait about this online class is that you can pause, iewinu, anu fast foiwaiu the
viueos at will. You can play it at fastei speeus whenevei neeueu. But it is also veiy easy foi
you to become a passive paiticipant. I want you to be active listeneis anu I encouiage you
to make youi own notes as you go along. This will help you to unueistanu anu leain the
mateiial ieally well, assuming of couise that you finu me engaging. If you uo that, you will
not neeu textbooks oi othei mateiials, except of couise to ieview anuoi ieau auuitional
stuff.

5??1"1+&5- *#!+0*,#!

We have howevei pioviueu you with seveial othei iesouices. Fiist, we have piepaieu some
biief LDOGI that covei: 0se of Spieausheets, Review of Statistics, anu a Note on Foimulae,
etc. We have also constiucteu seveial assignments that will be ciitical to the leaining
piocess.


4

"#["/++\!

In auuition, I pioviue below iefeiences of seveial alteinative textbooks that aie all veiy
high quality. To help you with youi ieauing, we have also pioviueu you chapteis fiom two
books as examples of iefeiences. Please note that the viueos uo not follow any specific book
anu the book chapteis aie only iefeiences; they uo not peifectly match the mateiial we
covei anu may sometimes contain mateiial that we will not covei. Ny goal is to expose you
to the funuamentals of finance, not eveiy uetail in eveiy textbook.

The list of textbooks is pioviueu below. Please see the Class Scheuule at the enu of this
syllabus, anu pioviueu as a Link on the main page, to iefei to the specific chapteis fiom two
of these books. You aie not iequiieu to puichase any of these books, but iecognize that one
of them is available to ieau foi fiee on the web. You must follow the guiuelines pioviueu by
the authoi foi use of the online mateiial. If you uo choose to buy a book, a ielatively iecent
euition will uo, anu look foi useu anuoi papeiback veisions.

(1) !"#$"#%&' )*+%+,'- .
+/
0/*&*"+- 12 34" 5'6,78
97*: 1""; ,%+ 1' $<#,7%:'/ =#"> ?>%@"+ "# 2"< ,%+ #'%/ *& ="# =#'' %&
7&&$ABB1"";8*4"CD'6,78*+="B'/.B
5FOUDPMU CGNRKLM OUG OGSO NLR OUGIG QUNBOGCI KI TCGG DL OUKI VGEIKOG6 OUG
HNOGCKNF KI QDBYCKMUOGR6 LDO BGCHKOOGR OD EG RKIOCKEPOGR TPCOUGC6 NLR LDO
BGCHKOOGR OD EG BDIOGR GFIGVUGCG)

I have iefeienceu chapteis of this book as suggesteu ieauings in the uetaileu class
scheuule. This book is iefeienceu as 12)

(2) Coipoiate Finance, 9
th
Euition, by Ross, Westeifielu & }affee.

I have also iefeienceu chapteis of this book as suggesteu ieauings in the uetaileu
class scheuule. The book is iefeienceu as *]@)

A couple of othei excellent textbooks aie:

(S) Coipoiate Finance, 2
nu
Euition, by Beik & BeNaizo.

(4) Piinciples of Coipoiate Finance, 1u
th
Euition, by Biealey, Nyeis & Allen.

Theie aie seveial othei books on finance anu I encouiage you to biowse a few befoie
settling on one oi two as iefeiences. Note again that the iuea is to pioviue you with
iesouices anu not to match each classviueo with specific books oi chapteis within them.

Finally, since many of you may have hau limiteu exposuie to Finance, it is impoitant to ieau
institutional mateiial at youi own convenience. Please ieau business anu financial news


5
iegulaily. Ciuise the web as often as possible not only to uncovei the wealth of infoimation
at youi uisposal, but to also leain how things woik. A goou web site to begin youi seaich is
http:finance.yahoo.com. I will use this web site at seveial points uuiing the "class." Reau
the Economist as often as you can; it has some thoughtful pieces. Bowevei, iecognize that
you neeu to uevelop the habit of ieauing mateiial ciitically; just because something is
publisheu in a ieputable outlet uoes not mean that the authoi knows what heshe is talking
about. I guaiantee you that theie is no one out theie who ieally unueistanus what oui
cuiient financial ciisis, oi even the ciisis in the 19Sus, is all about.

&0(/#*<,*0&,%1&4 5&? !$*#5?!%##"!

The puipose of the class is to intiouuce you to concepts anu applications, without woiiying
too much about the exact calculations. Baving saiu that, knowing how to calculate anu
execute an analysis has a lot of piactical value. I want you to know that most calculations
can be uone even using the foimulae anu a iegulai calculatoi. If you know what you aie
uoing, you can calculate the stuff. I theiefoie encouiage you to focus on the setting up of
pioblems, iathei than the calculations. When you get to the calculations, we will finu that
technology just helps you uo so much fastei. But, you will also iealize that spieausheets
anu calculatois simply calculate stuff aftei you tell them what to uo; they aie a means anu
not the enu! If you set up a pioblem incoiiectly, you will get an incoiiect answei. I will
theiefoie ue-emphasize the iole of calculations in the viueos anu use a spieausheet only to
illustiate the logic anu steps involveu in making uay-to-uay financial calculations. I will use
the functions built into spieausheets, but again you can actually cieate youi own foimulae
as well.

I am assuming that if you aie taking this class you have access to a computei anu the
inteinet anu, theiefoie, to spieausheets. I will use Excel at vaiious points in the viueos anu
pioviue a note on Spieausheets. You aie iesponsible foi leaining how to use spieausheets.
The assignments aie a gieat way to uo so as viitually all questions will iequiie you to uo
calculations using eithei a spieausheet oi an alteinative methou.

If you uo not have access to a spieausheet you can uo the entiie class using a financial
calculatoi. While any financial calculatoi will suffice, an BP1uBII is a goou compiomise
between functionality anu cost. Recognize howevei that you aie iesponsible foi leaining
the necessaiy skills since each calculatoi is uiffeient in some iespect (aftei all, they neeu to
be able to uiffeientiate!) Foitunately, the financial functions aie labeleu similaily to
spieausheets, anu the note on Spieausheets will give you some hints. Theie may be a bit of
leaining involveu, but it is not uifficult.

!+(# ,+&2#&"1+&!

Finance is so cool because it makes sense; theie is theiefoie veiy little to memoiize. The
ieal issue in life is to unueistanu the pioblem you aie faceu with. But theie is one
convention that is built into almost eveiy foimula anu in spieausheet functions. This


6
convention is ielateu to the fact that all uecisions can be placeu on a time line. All flows
(cash out oi cash in) occui at points in time, while inteiest iates apply to peiious of time.
0nless otheiwise specifieu, all flows occui at the enu of a peiiou. Theiefoie, if someone
says that Naiia ieceiveu $1u in yeai 1, it means the enu of yeai 1. (0f couise, most
uecisions involve an outflowinvestment touay; the beginning of the fiist peiiou. But it will
be obvious to you when that happens.) Bo not woiiy about this; you will quickly get useu to
the convention once we stait the class anu we uo pioblems togethei anu, foitunately, eveiy
textbook uses the same convention.

5!!14&(#&"!

You will be evaluateu iegulaily ovei the 1S-week peiiou using nine assignments anu a final
exam. Please use the Couiseia web site to access %+/ submit assignments. The submission
ueaulines aie inuicateu on each assignment. Late papeis will not be accepteu!

The assignments foi this couise aie quite intense. We will have LKLG assignments, each
ciafteu to help ieinfoice the leaining of concepts anu pioblems coveieu in class. By uesign,
a few pioblems aie moie uifficult than those piesenteu in class. I believe you will bettei
unueistanu the concepts by thinking thiough the issues involveu in solving the pioblem
anu you will leain excel in the piocess.

#[5(1&5"1+&

Apait fiom the assignments, theie will be DLG TKLNF GSNH in the 1S
th
week. Although the
exam will involve "numbei-ciunching," the main goal is to test youi unueistanuing of the
concepts.

&5"0*# +. 5!!14&(#&"! 5&? .1&5- #[5(

Since all giauing will be conuucteu using technology, all questions will take a TiueFalse,
fill in the blank, oi multiple-choice foim. The questions will almost always be woiu
pioblems, like the ones coveieu in class, but theie will be one specific answei to each
question. We have set up the giauing piocess so that you get feeuback, iegaiuless of
whethei you get the answei iight oi wiong, that is supposeu to make you think in the iight
way about the issues. We hope to eniich the giauing piocess in futuie offeiings to enable a
moie infoimative evaluation piocess.

1($+*"5&" 401?#-1&#!A

Always uiaw a timeline coiiesponuing to a pioblem, until you aie completely comfoitable
with uoing youi own analysis. Please ieau instiuctions foi the questionspioblems veiy
caiefully befoie you attempt to answei them. Some things to iemembei:

(a) Since an oveiwhelming majoiity of the questions involve numbeis, uo N0T entei any


7
symbol in youi answeis, just the numbei. Foi example, uo not entei "$" befoie the numbei;
oi "%" aftei it, even though the questions will have these expiessions;

(b) Bo not use commas;

(c) Foi simplicity, we will use uollais as the cuiiency. Rounu off all answeis involving
uollais to the closest iounu numbei. Bo not woiiy about uecimals; the giauing system has
been set up to accept iounuing to both iounu numbeis. Similaily, you uo not neeu to woiiy
about uecimals in a multiple choices answei containing uollais;

(u) Finance involves inteiest iates. We will expiess all inteiest iates in peicentages. Bo not
use moie than two uecimals in youi answeis.

Please look out foi any auuitional instiuctions in the assignmentsfinal.

#SNHBFG 9A Suppose youi answei is $S221.S2. The answei you entei shoulu be S221.
Theie is no $ sign oi comma in it. (To give you the benefit of uoubt, the computei will
accept S222 as a coiiect answei as well.)

#SNHBFG =A Suppose the answei to an inteiest iate question is 6.2SS%. You shoulu entei
6.2S. Theie is no % sign oi thiiu uecimal in it. (To give you the benefit of uoubt, the
computei will accept 6.26 as a coiiect answei as well.)

,+0*!# #25-05"1+& $*+,#!!

Bue to the natuie of the class, anu the high eniollments, all assignments anu the final exam
will be giaueu using technology. No peison will be involveu in the evaluation piocess. The
technology pioviueu by Couiseia is iueally suiteu foi giauing anu assessing peifoimance.

,+0*!# 4*5?1&4 5&? ,#*"1.1,5"#

Youi peifoimance will be evaluateu using a passfail giaue. The philosophy behinu oui
giauing is to make suie you gain auequate competency to be gianteu a ceitificate. To
qualify foi a ceitificate, you will neeu to fulfill the following iequiiements:

A scoie of at least 7u% on five of the nine assignments;
A minimum of 6u% on the final exam.

You will be alloweu OVD NOOGHBOI at each assignment as well as the final exam; but both
attempts must be completeu by the iespective ueaulines. You may of couise attenu the
whole class iegaiuless of youi peifoimance on assignments oi the final, but a passing
giaue is necessaiy to ieceive a ceitificate.




8

"#5,%1&4 5!!1!"5&,#

0wen Benkel has veiy giaciously agieeu to help me with this class. Consistent with oui
philosophy that you will leain fiom each othei, oui hope is that you will iesolve mostall
issues on youi own by ieviewing the viueos, uoing pioblems, ieauing chapteis, anu
uiscussing among youiselves. But 0wen will monitoi the Foiums anu post comments if
theie is an eiioi, especially in an assignment oi in the evaluation of the assignment.

1($+*"5&" 1!!0#! "+ ,+&!1?#*

5IIKMLHGLOI

The assignments aie meant to be challenging, though we have tiieu haiu to inciease the
uifficulty level giauually within each assignment. Noie impoitantly, the assignments ieflect
my belief about leaining. No one can ieally make you leain; you have to be willing to woik
haiu anu stiuggle. The teachei's iole is to expose us to the funuamental builuing blocks,
anu we neeu to leain by applying them to challenging pioblems. The ieason I love finance
is its applicability to all types of ieal woilu situations.

!DFPOKDLI OD 5IIKMLHGLOI

In the fiist offeiing, some people wanteu answeis to the assignments. This is a seemingly
ieasonable iequest but veiy uifficult to accommouate. Cieating questions foi the viueos
anu the assignments has been the most challenging pait of this new enueavoi. It took foui
people seveial weeks to cieate these, test them, anu then mouify them to fit the giauing
stiuctuie imposeu by technology. We believe oui assignments aie well thought out anu
ieflect a goou balance of conceptual anu applieu stuff. Bue to copyiight issues, we cannot
simply give you questions fiom existing books, anu I woulu not want to uo that anyway. It
will theiefoie be veiy uifficult foi us to offei this class multiple times if we have to keep
piepaiing new sets of questions with multiple veisions to allow you to attempt each one
moie than once. Banuing out answeis will foice us to uo that. We have insteau chosen to
pioviue a lot of hints about the main issue in each question anu you can always ievisit the
viueos, go back to the questions, woik in teams, etc., to leain the content. 0vei time, we
hope to woik with Couiseia to cieate iichei ways of giauing anu pioviuing feeuback
uepenuing on the type of eiiois that you may make.

%DLDC ,DRG

While leaining fiom each othei is veiy impoitant, we all iecognize the uiffeience between
collaboiation anu simply copying anu pasting woik uone by otheis. I stiongly encouiage
you to woik collaboiatively using piopei juugment. Similaily, please iespect all copyiight
iules of all mateiials, incluuing books, aiticles, etc.



9
While we ultimately cannot monitoi eveiything, Couiseia anu my team will monitoi oui
Foiums foi any activity that violates such coues of conuuct anu basic civility to each othei.

,DLONQO VKOU "5 NLR 1LIOCPQODC

uiven the laige numbei of stuuents, neithei 0wen noi I shoulu be contacteu with any
questions. While we love all of you, iesponuing to questions will be viitually impossible.
But 0wen will monitoi the foiums anu keep me infoimeu on a iegulai basis.


10

CLASS SCHEDULE: TOPICS and READINGS

Week

Topic
Video
Book
Chapters
Assignments and Notes

WEEK 1
Introduction
Time Value of Money: PV & FV for Single Cash Flows
1 IV(1, 2),
RWJ (4)

Background Note: Spreadsheets.

WEEK 2

Time Value of Money: PV & FV for Multiple Cash flows
2 IV(2,3),
RWJ (4)

Background Note: Formulae.

WEEK 3 ASSIGNMENTS 1 & 2 due by end of Week.

WEEK 4

Decision Criteria
3 IV(4),
RWJ (5)

WEEK 5
Decision Criteria &
Cash Flow Estimation
4 IV(4,13),
RWJ (5,6)

Background Note: Sample Cash Flow Template.

WEEK 6 ASSIGNMENTS 3 & 4 due by end of Week.

WEEK 7

Bonds
5 IV(3,5),
RWJ (8)

WEEK 8

Stocks

6
IV(3),
RWJ (9)

WEEK 9
ASSIGNMENTS 5 & 6 due by end of Week.

WEEK 10

Risk

7 IV(6,7,8),
RWJ (10)
Background Note: Review of Statistics.

WEEK 11

Risk & Return

8 IV(9),
RWJ (11)


WEEK 12 ASSIGNMENTS 7 & 8 due by end of Week.

WEEK 13

Valuation: Putting it All Together!

9 IV(16),
RWJ (16)

Background Note: The Capstone Problem.

WEEK 14

REVIEW




WEEK 15

Assignment 9 & FINAL due by end of Week.