FIN2002S
Principles of Finance
WELCOME MESSAGE
As module coordinator of the Principles of Finance module, I welcome you to the module.
The finance sector is a major driving force of a country’s economy. It encompasses the creating and maintaining of wealth, and overall managing of money that is crucial to the success of every business. Very broad areas, finance professionals can be found in every industry helping businesses as well as individuals.
The subject of Principles of Finance provides a mixture of both theory and practise . It aims to provide the students with an introduction to the role of Finance, financial markets, financial institutions as well as analysis of financial securities, thus providing a solid foundation for further study or employment in the financial services industry.
To successfully complete this module, it is strongly recommended that a consistent routine of studies is maintained, and several learning activities such as course assignments are to be completed at the stated submission date(s).
The graduates will have a wealth of career choices within and beyond the finance sector. You will be equipped for success in fields such as credit, corporate finance, financial planning and services, investment and wealth management.
This study guide outlines the discussion areas for each session. It is essential for these to be read prior to the sessions to have a better understanding in the subject topics.
Should you require clarification on any matter pertaining to the module, please do not hesitate to contact me.
I am looking forward to meeting you soon.
PART 1: INTRODUCTION
This Study Guide is designed to provide you with details of the module FIN2002S – Principles of Finance, the learning outcomes, delivery and assessment arrangements. The Study Guide consists of 6 parts.
Part 1 gives background details to the subject area are provided and the broad aims of the module are set out.
Part 2 consists of the module outline. In this part the (a) module learning outcomes, (b) the themes and topics to be explored are explained along with the (c) learning supports to be used.
Part 3 gives details of the module delivery arrangements. It sets out the session arrangements and the expectations in relation to your prior preparation and student engagement.
Part 4 provides details of the assessment techniques used in this module explaining the assessment components, their rationale.
Part 5 explains the UCD grading policy and grade descriptors drawing on the university document are given for each assessment component (i) Assignment and (ii) Examination.
Part 6 presents the concluding comments.
Background Details
a. Background to the Topic
This course provides an introduction to the principles of banking and finance. It module covers the fundamental basics of finance. The module will address issues such as why corporate finance is important and will introduce the theoretical underpinnings of financial concepts. A comprehensive range of issues including the role of corporate governance and agency theory in finance, how the stock and bond markets function, pricing stocks and bonds, and capital budgeting techniques will be introduced.
The topics covered in this module will allow students to learn about the concepts and theories in finance that would help investors and business decision-makers in making investment and financing investments as well as knowing how risk can be managed.
The knowledge obtained from this course would be very valuable for one’s to embark on a professional or business career in either the Financial Markets or the different Financial Institutions.
b. Module Aims
The aims of this module are to
- enable students to understand the importance of corporate finance and the theoretical underpinnings of financial concepts.
- enable students to understand the valuation of stocks and bonds.
- enable students to understand the role of corporate governance and agency theory in finance.
- allow students to apply capital budgeting techniques in the project evaluation process
Module philosophy
The module draws on student prior learning and work experience and combines insights from strategy, international trade and investment theory, human resource management and other areas.
PART 2: MODULE OUTLINE
Module Title: Principles of Finance
Module Code: FIN2002S
No. of ECTS: 10
Module Learning Outcomes
On completing this module, students will be expected be able to:
. Understand the importance and the role of Finance
. Apply valuation methods to both stocks and bonds
. Apply the techniques of capital budgeting and identify capital investment projects that maximize shareholder wealth
. Understand the concepts of risk and return and the basic principles of portfolio theory.
Module Text: Basic Finance: An Introduction to Financial Institutions,
Investments, and Management (13th Edition)
Cengage Learning by Herbert B. Mayo; Michael J. Lavelle ISBN: 9780357714744
Supplementary text 1: Principles of Finance (6th Edition),
Cengage by Besley, S and Brigham, E. F.
ISBN: 9781285429649
Supplementary text 2: Corporate Financial Management. (6th Edition).
Pearson Education Limited by Arnold, G. and Lewis, D. ISBN: 9781292140445
Themes and Topics
Part 1 Introduction to Finance:
. The finance world
. The objective of the firm.
. Corporate governance and agency theory.
Part 2: Valuation of Securities:
. Time value of money
. Present value and future value
. Valuation of bonds.
. Valuation of stocks
Part 3: Capital Budgeting decision:
. Net present value (NPV),
. Internal rate of return (IRR), and
. payback period methods
. Other project appraisal methods
Part 4: Portfolio Theory:
. Risk and Return.
. Portfolio analysis: mean-variance portfolio theory.
. Efficient portfolios
. Capital Asset Pricing Model (CAPM)
. Efficient Market Hypothesis
Learning Materials
For this module, please read the assigned chapters in the prescribed text and attempt the learning activities in the hand-outs prior to attending the sessions.
Other useful sources
The following textbooks’ companion websites provide a self-quiz and study program that allows students to evaluate their performance through a practice test and recommendations:
. https://media.pearsoncmg.com/intl/global/ema_ge_mishkin_econmbfm_11/
index.html-
. http://wps.pearsoned.co.uk/
ema_ge_mishkin_econmbfm_10/226/58088/14870766.cw/index.html
. http://wps.aw.com/bp_mishkin_econmbfm_10/215/55045/14091673.cw/
index.html
Students completing this module are expected to participate in session discussions and learning activities and be familiar with recent developments in the business world. To facilitate this, the following source material is useful
. The Economist
. The Wall Street Journal
. The Straits Times
. The Financial Times
. Business Week
. Fortune
. Investopedia.com
PART 3: MODULE DELIVERY SCHEDULE
The module delivery relies on students’ ability to engage in prior preparation, to seek confirmation and clarification as appropriate and to be actively engaged during the sessions.
Session Arrangements
Each student is expected to attend and be prepared for all sessions. Table 1 below outlines the structure for the sessions.
Please see below the schedule and details of our sessions
Session Arrangements
The module delivery relies on students’ ability to engage in prior preparation, to seek confirmation and clarification as appropriate and to be actively engaged during the sessions. Each student is expected to attend and be prepared for all sessions. An essential part of this preparation is to answer of the assigned problems before coming to class. This will foster discussion and will enhance the learning experience for the student.
PART 4: ASSESSMENT DETAILS
This module has three assessment components with specific weightings and marks awarded totalling 100. The purpose of each assessment is as follows:
. Individual Assignment aims to focus your learning by ensuring understanding of business structures and theories. You will be asked to evaluate business entities and display your ability to apply it to real situations through a variety of assessment strategies. Continuous Assessment is intended to promote inter-active learning through group work while assessing your understanding of directors’ duties and its’ academic versus practical applications. Continuous Assessment has been designed so that you will be assessed through multiple assessment types. These assessments may come in the form of a report, class participation, group work or any alternative combination.
. Group Assignment aims to focus your learning by ensuring understanding of what you have learned during the sessions.
. The Examination is the formal examination which aims to get insights on your understanding of issues (theory and practice) addressed in the module.
Students are expected to complete all assessments that they are submitted by the specified date. All submissions must be typed, be well laid out, written in an academic style with appropriate headings (introduction, main part and concluding comments) and sections, in word document or pdf format. Other formats will NOT be accepted
Please ensure that all submissions are entirely your own work – for UCD’s policy on plagiarism click on the link below (please see Appendix 3 for further information on Plagiarism and the policy on the Late Submission of Coursework):
http://libguides.ucd.ie/academicintegrity
The weighting assigned for each component is shown in Table 2 below. (* I = Individual; G = Team)
Table 2 – Assessment Components
|
Assessment components Weighting Individual
1. Individual Assignment 20% I
2. Group Assignment 20% G
3. Examination 60% I
|
Module Assessment Components
In the following pages, further details of each assessment component are presented along with expectations in relation to prior preparation and completion.
1. Individual assignment (20%) ( Word limit: 2,000 words ± 10%)
This assessment aims to provide students with an opportunity to develop an understanding of key concepts in finance, analyse various investment products based on the respective risk and return. You are expected to read beyond textbooks and able to apply the knowledge gain from real life examples either from your working environment or/and case studies read and are able to demonstrate your competence in the areas indicated in the questions. You are encouraged to provide specific in-depth comments instead of general comments.
You will need to write up to 2,000 words ( ± 10%) to address all the questions.
Requirement:
Choose a country and examine the finance sector of that country. You need to show your understanding in the characteristics and efficiency of the finance sector, as well as examine the implementation of corporate governance in that country.
Your assignment should include the following:
Concept of a financial sector: development into a financial centre
What are the financial services available in (Country)?
The Roles and Operations of the various financial intermediaries/institutions.
The Role of Stock Exchange
The Role of Central Bank in developing the financial sector
What is the Role of government in Corporate Governance?
How businesses implement (effective) Corporate Governance?
Recent economic development in (Country).
You will need to write up to 2,000 words ( ± 10%) to address all the above points. Presentation of work must be done in word document or pdf format and only one file submission. Any other format will NOT be accepted.
2. Group assignment (20%) ( Word limit: 2,500 words ± 10%)
This assessment aims to provide students with an opportunity to analyse various investment alternatives based on the respective risk and return so as to choose the most appropriate investment opportunity. You are expected to read beyond textbooks and able to apply the knowledge gain from real life examples either from your working environment or/and case studies read and are able to demonstrate your competence in the areas indicated in the questions. You are encouraged to provide specific in-depth comments instead of general comments.
Instructions to students: Form. a group of 3 to 5 students,
a. Download stock prices for any two companies from different industries, (preferably same economy) – 5 years of monthly closing prices for each company. You can use any database to obtain the historical prices e.g. datastream, www.investing.com/equities etc. Use the 5-year data to generate average monthly returns and standard deviations. Calculate the annualised mean return, standard deviation and correlation of the two stocks. Show your working clearly.
b. Use investment proportions for the two stocks ranging from 0% to 100% (you may need a wider range say 0% to 150%) using intervals of 5%. Tabulate the investment opportunity set of the two stocks. Plot the investment opportunity set of the two stocks. Show your working clearly.
c. Calculate the weights on the optimal risky portfolio consisting of the two stocks, denoted as stock 1 and stock 2, using the following formulae. Show your working clearly.
Show your working clearly for the calculation of the expected return and standard deviation of this optimal risky portfolio (ORP). Show and label clearly the optimal risky portfolio on the graph of the investment opportunity set of portfolios.
d. Calculate the weights on the minimum variance portfolio consisting of the two stocks, denoted as stock 1 and stock 2, using the following formulae. Show your working clearly.
Calculate the expected return and standard deviation of this minimum variance portfolio (MVP). Show clearly the minimum variance portfolio on the same graph with ORP in (c) above. Identify the MVP, ORP and efficient frontier consisting of the portfolios made up of these two assets. Label them clearly on the graph.
e. Discuss in details on diversification with reference to the efficient frontier and comparing the expected return and standard deviation of the optimal risky portfolio to the minimum-variance portfolio in your answer.
You will need to write up to 2,500 words ( ± 10%) to address all the questions. Presentation of work must be done in word document or pdf format and only one file submission. Excel submission or any other format will NOT be accepted.
Table 2B – Assignment Deadline Summary
|
Continuous Assessment
Deadlines
|
Date Assignment Due
|
|
Individual Assignment
|
Wednesday, 9th July 2025
|
|
Group Assignment
|
Friday, 18th July 2025
|
|
Examination
|
Wednesday, 23rd July 2025
|
The Assignments must be submitted in via Brightspace. See Assignment deadline in table 2B above. It is the student’s responsibility to retain a copy of any submitted assessment/project work. Please read the Grade Descriptors in the Assignment Grade Descriptor table.
3. Examination:
The examination will focus on module themes and the material covered in the text, cases, assigned readings, videos and class discussions. For this, students are expected to demonstrate their understanding of theory and practice addressed throughout the module. The examination question format will be designed to allow you to show your understanding of the topics discussed and reveal your learning (new and prior). More specific guidelines regarding the examination paper format and questions will be provided during the final session.
Students will have the opportunity to ask questions about its design and style and be advised the type of answers expected.
A recent past examination paper is included in Appendix 2 to this Study Guide, please be prepared for slightly different style. of question.