Financial Decision Making
- Sciences
- 200 level
- 2 credit units
- 82 pages
- 9 units
This course introduces students to financial decision theory, covering modeling of uncertainty, basic financial assets like bonds and stocks, and asset pricing models. It explores portfolio optimization techniques and risk management strategies. Students will learn about capital asset pricing, dividend decisions, and factors influencing stock values. The course also examines fixed-income securities and the impact of market factors on investment returns, providing a comprehensive overview of financial decision-making.
About this course
- Difficulty
- Intermediate
- Study hours
- 150 hours
- Maths
- Intermediate
- Content
- Theoretical, case study, problem solving
- Practical work
- No
- Assignments
- Tutor Marked Assignments
- Final Examination
What you'll read
The real module and unit structure of FMT212, taken from the course material NOUN publishes.
One paragraph, so you can see how it reads
FMT212 · UNIT 1: MODELLING OF UNCERTAINTY
Normative or prescriptive models develop decision rules or criteria for optima l solutions. They are applicable to repetitive problems, the solution process of which can be programmed without managerial involvement. Liner programming is also a prescriptive or normative model as it prescribes what the managers must follow.
What you should be able to do
- Understand the principles of financial decision theory.
- Analyze and evaluate different types of financial assets.
- Apply asset pricing models to determine investment values.
- Construct and optimize investment portfolios.
- Assess and manage investment risks.
- Make informed financial decisions based on theoretical frameworks.
What it prepares you for
- Financial Analyst
- Portfolio Manager
- Investment Banker
- Risk Manager
- Financial Advisor
- Investment Management
- Banking
- Insurance
- Corporate Finance
- Financial Consulting
Where it gets hard
The units students slow down on, and what makes each one heavy.
- Module 2: Basic Financial Assets and Related Issues: Stocks
Unit 4: Evaluation of Common Stocks
Involves understanding the complex interplay of corporate actions, market sentiment, and macroeconomic factors that drive stock prices, requiring analytical and interpretive skills.
- Module 3: Asset pricing,
Unit 1: Asset pricing
Requires a solid grasp of statistical concepts and financial theory to understand the model's assumptions, limitations, and practical applications in investment decisions.
A suggested way through it
13 weeks, about 60 hours in total. Yours will differ.
- Week 1Module 1: Modelling of Uncertainty
Unit 1: Modelling of Uncertainty · 4 hours
Read the introduction to understand the importance of models in operations research.. Define a model and describe the process of modelling.. Classify different types of models and understand their characteristics.. Outline the advantages and disadvantages of using models in decision-making..
- Week 2Module 2: Basic Financial Assets and Related Issues: Bonds
Unit 1: Bonds · 5 hours
Review the definition of a bond and understand its role in finance.. Identify and differentiate between various types of bonds (municipal, zero-coupon, agency, corporate, high-yield).. Examine the features of bonds, including maturity dates, interest payments, and credit ratings.. Discuss the benefits, advantages, and disadvantages of investing in bonds..
- Week 3Module 2: Basic Financial Assets and Related Issues: Stocks
Unit 2: Stocks · 5 hours
Explore what stocks have to offer investors and the appeal of common stocks.. Understand stock price behavior and the concepts of bull and bear markets.. Learn how to calculate stock returns and the factors influencing them.. Discuss the pros and cons of stock ownership, including benefits and disadvantages..
- Week 4Module 2: Basic Financial Assets and Related Issues: Stocks
Unit 3: Buying and Selling of Common Stocks · 5 hours
Familiarize yourself with the process of buying and selling common stocks.. Learn how to read stock quotes and understand transaction costs.. Determine the par value, book value, market value, and investment value of common stocks.. Understand the dividend decision process and corporate versus market factors..
- Week 5Module 2: Basic Financial Assets and Related Issues: Stocks
Unit 4: Evaluation of Common Stocks · 5 hours
Understand the rationale behind common stock evaluation.. Identify the sources of common stock value, including dividends.. Learn about the concept of present value of future dividends.. Analyze growth prospects for stocks in aggregate, considering GNP and earnings per share..
- Week 6Module 2: Basic Financial Assets and Related Issues: Stocks
Unit 5: Investing in Fixed-Income Securities · 5 hours
Explore the concept of investing in fixed-income securities.. Understand the benefits of investing in bonds and their versatility.. Analyze total returns in the bond market, considering current income and capital gains.. Identify essential features of a bond, including maturity date and call features..
- Week 7Module 3: Asset pricing,
Unit 1: Asset pricing · 5 hours
Define the Capital Asset Pricing Model (CAPM) and its components.. Differentiate between systematic and specific risk.. Understand asset-specific required return and its calculation.. Discuss the assumptions and problems associated with CAPM..
- Week 8Module 3: Portfolio Optimisation
Unit 2: Portfolio Optimization · 5 hours
Explore the history of portfolio optimization.. Identify different methods of portfolio optimization.. Understand optimization constraints, including regulation, taxes, and transaction costs.. Learn about the mathematical tools used in portfolio optimization..
- Week 9Module 3: ASSET PRICING, PORTFOLIO OPTIMISATION AND RISK MANAGEMENT
Unit 3: Risk Management · 5 hours
Define the concept of risk and its sources.. Differentiate between business risk and financial risk.. Understand investment return over multiple periods.. Discuss risk premiums and risk aversion..
- Week 10Module 2: Basic Financial Assets and Related Issues: Bonds
Unit 1: Bonds · 4 hours
Review the types of bonds and their features.. Practice reading bond tables and interpreting yield information.. Solve numerical problems related to bond pricing and yield calculations..
- Week 11Module 2: Basic Financial Assets and Related Issues: Stocks
Unit 2: Stocks · 4 hours
Review the advantages and disadvantages of stock ownership.. Analyze the factors affecting stock prices and returns.. Discuss the different types of common stock and their characteristics..
- Week 12Module 3: Asset pricing,
Unit 1: Asset pricing · 4 hours
Review the key concepts of CAPM and its applications.. Practice calculating asset-specific required returns using CAPM.. Discuss the limitations and criticisms of the CAPM model..
- Week 13Module 3: ASSET PRICING, PORTFOLIO OPTIMISATION AND RISK MANAGEMENT
Unit 3: Risk Management · 4 hours
Review the different types of investment risks and their impact on portfolio returns.. Discuss strategies for managing and mitigating investment risks.. Analyze case studies of risk management in real-world scenarios..
Preparing for the exam
- Create a detailed study schedule allocating specific time slots for each module and unit.
- Focus on understanding the underlying assumptions and limitations of the CAPM model.
- Practice solving numerical problems related to bond valuation, stock pricing, and portfolio optimization.
- Review past assignments and tutor-marked assignments to identify areas of weakness.
- Create concept maps linking key concepts from different modules to reinforce understanding.
- Form a study group with peers to discuss challenging topics and exchange insights.
- Prioritize studying the units identified as peak difficulty periods.
- Review relevant formulas and equations, ensuring you understand their application.
- Practice time management techniques to efficiently answer exam questions.
- Focus on understanding the practical implications of financial theories in real-world scenarios.
Questions students ask about this course
What is FMT212 about?
This course introduces students to financial decision theory, covering modeling of uncertainty, basic financial assets like bonds and stocks, and asset pricing models. It explores portfolio optimization techniques and risk management strategies. Students will learn about capital asset pricing, dividend decisions, and factors influencing stock values. The course also examines fixed-income securities and the impact of market factors on investment returns, providing a comprehensive overview of financial decision-making.
How many units does FMT212 have?
FMT212, Financial Decision Making, has 9 units across 3 modules, over 82 pages of course material. You can read it one unit at a time.
How many credit units is FMT212?
FMT212 carries 2 credit units, at 200 level in Sciences.
Is FMT212 hard?
FMT212 is rated intermediate level, with intermediate mathematical content. It is mostly theoretical, case study and problem solving work.
How long does FMT212 take to study?
About 150 hours of study, spread across its 9 units.
How is FMT212 assessed?
FMT212 is assessed by Assignments, Tutor Marked Assignments and Final Examination.
What can I do with FMT212?
Financial Analyst, Portfolio Manager, Investment Banker, Risk Manager and Financial Advisor.