Prof Richard Payne and Dr Hongda Zhong

This course is compulsory on the BSc in Finance, BSc in Financial Mathematics and Statistics and BSc in Statistics with Finance. This course is available on the BSc in Accounting and Finance, BSc in Actuarial Science, BSc in Business Mathematics and Statistics, BSc in Econometrics and Mathematical Economics, BSc in Economics, BSc in Management, BSc in Mathematics and Economics and BSc in Mathematics, Statistics, and Business. This course is not available as an outside option nor to General Course students.

Students on the BSc in Management can only take this course if they have met the following programme-specific prerequisites: a 1st in MA107 and/or ST107 and email permission from their Senior Undergraduate Tutor.

This course cannot be combined with FM212. Students on the BSc in Accounting and Finance can only take this course if they have met the general course prerequisites as below.

Students must have completed: one level 1 Economics course (either EC100 Economics A or EC102 Economics B), MA100 and ST102.

The course examines the theory of financial decision-making by firms and examines the behaviour of the capital markets in which these decisions are taken. The topics covered are the theory of capital budgeting under certainty in perfect and imperfect capital markets, portfolio theory, equity and bond markets, the capital asset pricing model, efficient markets, derivative pricing, sources of funds, basic theory of capital structure and the cost of capital, company dividend decisions and financial markets and institutions.

This course covers the same topics as FM212. Thus, both FM213 and FM212 are equivalent content-wise.  However, compared to FM212, this course puts more emphasis on the underlying statistical theory and relies more on the use of mathematical methods.

20 hours of lectures and 15 hours of classes in the MT. 20 hours of lectures and 15 hours of classes in the LT. 2 hours of lectures and 1 hour and 30 minutes of classes in the ST.

Students are expected to produce written work for classes and to make positive contributions to class discussion.

Detailed course programmes and reading lists are distributed at the start of the course. Illustrative texts include: Principles of Corporate Finance by Richard Brealey, Stewart Myers, and Franklin Allen, McGraw-Hill Inc.

Exam (100%, duration: 3 hours) in the summer exam period.