Lecture:Date 
Topic 
Text Chapters 
Other Readings 
1:
Thurs. 7/22 
Course mechanics, overview.
Discussion of the investment project.
Introduction to Fisher
model

PCBR Ch.1: Arbitrage and Financial Decision
Making
PCBR Ch. 14: Interest Rates, Investments and Capital
Markets
Class slides:
422aintro_ez.pdf
Class
slides: 422fisher1_ez.pdf
tablet pc notes lec 1

Varian, Ch.10
Hirshleifer& Hirshleifer,
14.114.2

2:
Fri: 7/23 
Intertemporal allocation, Fisher's exchange model. Present value, the
role of financial markets. 
PCBR Ch.1: Arbitrage and Financial Decision Making
Class
slides: 422fisher2_ez.pdf
tablet pc notes lec 2

Varian, Ch.10
Hirshleifer& Hirshleifer,
14.114.2 
34:
MonTues: 7/26  7/27 
Intertemporal allocation, Fisher's model with production and exchange.
The Fisher separation theorem. Determinants of the level of real
interest rates.
Inflation and interest rates.
Start
Present value calculations. 
PCBR Ch.
2: The Time Value of Money
Class
slides: 422fisher2_ez.pdf
Class
slides: Present Value Methodology EZ df
tablet pc notes lec 3
tablet pc notes lec 4 
Varian, Ch.10
Hirshleifer& Hirshleifer,
14.314.7 
5:
Wed: 7/28 
Present value calculations. 
PCBR Ch.
2: The Time Value of Money
PCBR Ch. 3: Interest
Rates
Class
slides: Present Value Methodology EZ df
tablet pc notes lec 5 

6:
Thurs: 7/29 
Valuation of bonds. Interest fluctuations and bond prices. 
PCBR Ch. 6: Valuing
Bonds
Class Slides:
Security
Valuation: Bonds EZ.pdf
tablet pc notes lec 6 

7: Fri: 7/30 
The
term structure of interest rates.

PCBR Ch. 6: Valuing
Bonds (Appendix)
Class Slides:
Security
Valuation: Bonds EZ.pdf
tablet pc notes lec 7 (these notes got lost when my laptop shut down
unexpectedly, sorry)


8: Mon: 8/2 
The
term structure of interest rates. Introduction to stock price
valuation 
PCBR Ch. 7: Valuing
Stocks
Class
slides: Security
Valuations Stocks.pdf
tablet pc notes lec 8 

9: Tues: 8/3 
Valuation of stock. Dividends, earnings, interest rates, and stock
prices. 
PCBR Ch. 7: Valuing Stocks
Class
slides: Security
Valuations Stocks.pdf
tablet pc notes lec 9 

10: Wed: 8/4 
Investment decisions. Net present value rule and applications.
Internal rate and its problems.
Further applications of net present value. 
PCBR Ch. 4: Investment Decistion Rules
PCBR Ch. 5: Fundamentals of Capital Budgeting
Class slides:
Investment Decision
Making EZ.pdf
tablet pc notes lec 10 

11: Thurs: 8/5 
Review: Random variables, distributions, expected values, variance,
covariance. 
PCBR Ch. 15: Uncertainty
Download RV Review and do the problems:
rvrewiew.pdf (problems),
rvkey.pdf (solutions)
Class slides:
Random Variable Review
EZ.pdf
tablet pc notes lec 11 

12:
Fri: 8/6 
Decision making under uncertainty.
The
expected utility hypothesis 
PCBR Ch. 15: Uncertainty
Class slides:
Expected Utility Theory
EZ.pdf
tablet pc notes lec
12 
Varian, Ch.12
Pyndick and Rubinfeld, Ch 5 
13: Mon: 8/9 
Midterm Exam
Midterm
Exam Solutions
Project Assignment 1 Due. 
Closed book and closed note exam. I will allow one page (doublesided)
of notes.
Bring blue/green book and calculator 

14: Tues: 8/10 
Introduction to risk and return.

PCBR Ch. 8: Capital
Markets and the Pricing of Risk
Class slides:
Risk & Return Updated.pdf
tablet pc notes lec 14 

15:
Wed: 8/11 
Introduction to portfolio theory 
PCBR Ch. 9: Optimal
Portfolio Choice and the Capital Asset Pricing Model (sections 16)
Class slides:
Portfolio Theory EZ.pdf
tablet pc notes lec 15 

16: Thurs: 8/12 
Individual investor optimum.
The Capital Asset Pricing Model

PCBR Ch. 9: Optimal
Portfolio Choice and the Capital Asset Pricing Model (sections 16)
Class slides:
Portfolio Theory EZ.pdf
tablet pc notes lec 16 

17:
Fri: 8/13 
The Capital Asset Pricing Model
Investor Behavior and Capital Market Efficiency 
PCBR Ch. 9: Optimal
Portfolio Choice and the Capital Asset Pricing Model (sections 78)
PCBR Ch. 10:
Investor Behavior and Capital Market Efficiency (section 1)
Class slides:
CAPM EZ.pdf
Class slides:
Market Efficiency EZ.pdf
tablet pc notes lec 17 

18:
Mon: 8/16 
Efficient capital markets, definition, implications.
Introduction
to Options 
PCBR Ch. 10:
Investor Behavior and Capital Market Efficiency
CBR Ch. 11: Financial
Options
Class slides:
Market Efficiency EZ.pdf
tablet pc notes lec 18 

19:
Tues: 8/17 
Introduction
to Options
Options markets, valuing options: basic ideas 
PCBR Ch. 11: Financial
Options
Class slides:
Options EZ.pdf
tablet pc notes lec 19 

20: Wed: 8/18 
Valuing options: binomial pricing and BlackScholes. 
PCBR Ch. 12: Option Valuation
Class slides:
Options EZ.pdf
tablet pc notes lec 20


21:
Thurs: 8/19 
Introduction to risk management 
PCBR Ch. 12: Option Valuation
Class slides:
Options EZ.pdf
tablet pc notes lec 21 

22: Final Exam Fri: 8/20 
Project Assignment 2 Due. 

