University of Connecticut
Financial Mathematics II
Math 289/369
Spring 2004
Classes: MW: 4:30 – 5:45 Instructor: James G. Bridgeman, FSA
PB 38 MSB408
Office Hours: M: 12:00 –
1:30 860-486-8382
Th:
2:30 – 3:30 bridgeman@math.uconn.edu
F: 1:30
– 3:00 instructor's web site math.uconn.edu/~bridgeman
Or by
appointment course web site
math.uconn.edu/~bridgeman/math369/index.html
Context for the Course
Required for the
Professional Master’s degree in Applied Financial Mathematics
Partial preparation for SOA/CAS course 2 examination on Interest Theory, Economics and Finance
(Next scheduled for Thursday May 20, 2004)
Introduction to the Applied Mathematics of Corporate Finance
Brealey & Myers, Principles of Corporate Finance (7th ed.)
Various resources as referenced in the text
Society of Actuaries, Study Note Package for course 2 examination, see http://www.soa.org/
ACTEX/Mad River Books
(distr.), Study Manuals and related material for Course 2 Exam
Chew, The New Corporate
Finance/where theory meets practice (3rd ed.)
Megginson, Corporate
Finance Theory
Term Paper 10%
2 Take-home Quizzes 10%
Mini-cases 20%
Mid-term Exam 25%
Final Exam 35%
Although graduate students (369) and undergraduates (289) will take the same quizzes and exams, the
grading will be adjusted to demand higher performance from the graduate students.
Outline & Intended Pace
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Week of |
Topic(s) |
Chapter |
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Jan. 21 |
Financial profession – decisions about value; cash flow; valuation |
Ch.1, 2 |
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Jan. 28 |
Net present value principle; opportunity cost of capital; Financial statement analysis – where (when) is the cash? |
Ch.2, 29, 4 |
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Feb. 4 |
Free cash flow; equity valuation; project net present value |
Ch.4, 5 |
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Feb. 11 |
Project decisions/valuation; expected value of cash flow; variance of returns |
Ch. 6, 7 |
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Feb. 18 |
Market price of risk; capital asset pricing model |
Ch. 8 |
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Feb. 25 |
Risk adjusted opportunity cost of capital; handling cash flow uncertainty |
Ch. 9, 10 |
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March 3 |
Where value comes from; measuring value-creation |
Ch.11, 12 |
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March 17 |
Market returns; market efficiency; mid-term exam March 17 (thru Ch. 12) |
Ch.13 |
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March 24 |
Sources of financing; accessing financing |
Ch.14, 15 |
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March 31 |
Dividends and returns; debt leverage on returns |
Ch.16, 17 |
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April 7 |
Debt effects on expected cash flows |
Ch.18 |
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April 14 |
Debt-adjusted opportunity cost of capital -- WACC |
Ch.19 |
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April 21 |
Option cash flows; valuation when net present value won’t work |
Ch. 20, 21 |
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April 28 |
Real options and their value |
Ch.22 |
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Final Exam TBD week of May 3 - 8 |
All |
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A paper will be due on May 3. Graduate students (369) will choose any of the main
topics (text chapters) in the syllabus and prepare a paper covering it in more depth, or presenting
extensions of the material in it, after consulting outside references. Undergraduates (289) may do
the same, or they may write on a general topic that will be announced in class early in the semester.
There will be two take-home quizzes assigned, the weeks of Feb. 18 and April 14. They will be
designed to challenge and you may work in teams to come up with the answers. .
Graduate students (369) will submit the mini-cases for chapters 3, 4, 5, 6, 9, 10, 11, and 21 within a week
after the completion of the chapter. Undergraduates (289) will submit the mini-cases for
chapters 3, 4, 5, 6 and 11.
Both the syllabus and the grading plan are subject to change with appropriate advance notice
to the class.