After completing this course you will

- be able to work with basic concepts of statistics and probability theory (expected value, variance, standard deviation, covariance and correlation).
- be familiar with the securities traded on financial markets.
- understand the usefulness and applicability of financial markets and instruments.
- be able to shift money across time by discounting and compounding.
- be able to use financial mathematics in order to calculate the present value of some standard cash flow patterns (annuities, growing annuities, perpetuities, growing perpetuities) efficiently.
- be able to identify "similar bonds", extract information from traded bonds in order to value "similar" non-traded bonds and detect overvalued and undervalued bonds.
- be able to evaluate the credit risk of a bond by analyzing its credit ratings.
- be able to translate the rating issued by one rating agency into the rating of another rating agency.
- know how to measure risk.
- be able to derive expected return, variance, standard deviation, covariance and correlation coefficient from historical data or from scenario-based forecasts.
- be able to determine the risk/return profile of a portfolio.
- know how to use diversification in order to improve your personal investment strategy (e.g. for your retirement saving).
- be able to minimize the risk, given a fixed target expected return.
- be able to maximize the expected return, given a fixed target level of risk.
- understand the trade-off between risk and expected return.
- understand the difference between market risk and unique risk and be able to decompose risk into these two types of risk.
- understand the importance of beta, know the determinants of beta and how to compute and interpret beta.
- be able to implement the Capital Asset Pricing Model using historical data.
- be able to compute different types of cost of capital (cost of equity, cost of debt, weighted average cost of capital).
- know how to include the tax advantage of debt into the discount rate.
- understand what are the determinants of the cost of debt, the cost of equity and the weighted average cost of capital (including the capital structure).
- understand the cost of capital principle and by this be able to derive the risk-adjusted discount rate (e.g. for stock valuation, capital budgeting or business valuation).
- be able to value stocks using the Dividend Discount Model in order to detect any overvalued or undervalued stocks.
- be able to derive the cash flows relevant for investment decision-making and to make capital budgeting decisions.
- be able to value businesses using the Discounted Cash Flow technique.
- be familiar with the terminology and some data providers used on the financial markets (e.g. Reuters, Bloomberg, internet).
- know how to apply EXCEL (e.g. the EXCEL Solver with and without constraints) in order to solve practical financial problems.