Foundations of Finance

01Defining Finance and the Financial System 02Valuation and Management: The Two Challenges 03Stocks, Flows, and the Five Cash-Flow Decisions 04Time, Risk, and the Six Principles of Finance 05How to Learn Finance: Practice and Study Habits Problem set0/10 Problem set 20/10 Practice∞

Present Value

01Information and Price: An Auction and Fannie Mae 02Who Pays for the Fannie and Freddie Guarantee?03What Counts as an Asset: Patents, Secrets, Brands 04An Asset as a Sequence of Dated Cashflows 05The Value Operator and the Cashflow Timeline 06Dates as Currencies: Building Net Present Value 07Discount Factors: Market Prices for Future Dollars 08A Worked Net Present Value and Its Assumptions 09The Opportunity Cost of Capital and Present Value Problem set0/10 Problem set 20/10 MIT problem set0/5 Practice∞

01Does the Currency Change an NPV's Sign?02Moral Hazard and Contagion: Where Bailouts Stop 03The NPV Rule at Work, and Choosing the Rate 04The Perpetuity: Why Cash Forever Is Worth C/r 05Reading the Rate Off a Perpetuity's Price 06The Growing Perpetuity, and When Growth Outruns r 07Building the Annuity from Two Perpetuities 08The Annuity Discount Factor and Mortgage Payments 09APR, the Effective Annual Rate, and Compounding Problem set0/10 Problem set 20/10 MIT problem set0/13 Practice∞

Defining Finance and the Financial System

If finance is just mathematics plus money, how can a Chern-Simons theorist and a man doing arithmetic by hand both win at it?

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Your summary note

1. The definition of finance and its mathematical spectrum
  Write the course's first equation in words, mathematics plus money gives finance, and record the span of mathematics it covers, from differential geometry down to high school arithmetic.
2. Finance as both research discipline and practical language
  Record the two-sided claim that finance is rigorous and intellectually demanding as a research subject and at the same time the indispensable everyday language of business decisions.
3. Simons, Buffett and Welch as points on the spectrum
  For each of the three, write the level of mathematics behind the career, what each one built with it, and the common command of financial language they share.
4. The four components of the financial system
  List households, financial intermediaries, nonfinancial corporations and capital markets, note that funds flow among them, and state that the same analysis applies to all four with only the terminology changing.
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