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∞

Time, Risk, and the Six Principles of Finance

What makes financial analysis hard, and why does stripping away time and risk collapse finance into elementary microeconomics?

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Your summary note

1. Time and risk as the two sources of difficulty
  State that without decisions across time and without uncertainty finance reduces to elementary microeconomics, record the $1 today versus $1 next year and riskless versus risky $1 contrasts, and note time precedes risk.
2. P1-P3: no free lunch, preferences, self-interest
  State each of the three in its strict form, free lunch program, non-satiation with impatience and risk aversion, and self-interested agents, then record the Mother Teresa case as the example for the third.
3. P4-P6: prices, adaptive markets, risk-sharing and frictions
  Write the last three in one line each, note they are used throughout and examined only at the end, and record that all six are approximations to a more complex truth.
4. The A-D structure of the course
  List Sections A Introduction, B Valuation, C Risk and D Corporate Finance with one line of content each, and note the course closes by reopening the approximations the framework suspends.
Attempt 1 of 2