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My learning journey in Foundations of Modern Finance I

As a student in Foundations of Modern Finance I, I have been on an incredible learning journey exploring the fundamental principles of finance. From the first class, I was immediately intrigued by the intricate relationship between time, money, and risk. The course has provided me with a deep understanding of financial concepts and theories that are essential in the world of finance.

One of the key concepts we studied in the course was the time value of money. Through various examples and exercises, I learned how to calculate the present value and future value of cash flows, including annuities and perpetuities. Understanding the time value of money is critical in determining the worth of various investment opportunities and evaluating the feasibility of long-term projects.

Another important topic we covered in the course was risk and return. We examined different investment opportunities and learned how to calculate risk and return metrics, such as expected return, standard deviation, and beta. We also explored how diversification can be used to manage risk and optimize investment portfolios. This knowledge has been incredibly valuable in my understanding of financial markets and investment strategies.

The course also introduced me to the concept of capital structure and the various sources of financing available to businesses, such as debt and equity. We learned how to calculate the cost of debt and equity, and how to determine the optimal capital structure for a business. This knowledge has been instrumental in understanding corporate finance and how businesses make financing decisions.

Week 1: Financial Decisions

As a student in Foundations of Modern Finance I, I learned a lot during the first week of class. Here are the three main takeaways from our discussion on Financial Decisions:

  • Financial decisions are all about making choices – as individuals, as businesses, and even as governments.
  • There are many different types of financial decisions, ranging from short-term decisions like what to buy at the grocery store, to long-term decisions like how much to save for retirement.
  • Finally, financial decisions have real-world implications. When individuals and organizations make good financial decisions, they can improve their financial health and overall well-being.

I found some problems quite interesting:

Part 4

Your firm is considering two projects, project A in Argentina and project B in Britain, respectively with the following cash flows.

Week 2: Market Prices and Present Value

I found the second week of class to be challenging yet insightful. Here are the three main takeaways from our discussion on Market Prices and Present Value:

  • Market prices are determined by supply and demand. In financial markets, prices are constantly changing as buyers and sellers interact and negotiate with one another. As investors, we need to be able to understand these market dynamics in order to make informed decisions about buying and selling financial assets.
  • Present value is a key concept in finance that helps us understand the time value of money. Essentially, it means that money is worth more in the present than it is in the future, because we can invest it and earn interest. By calculating present value, we can determine how much an investment is worth today, given its expected future cash flows.
  • The relationship between market prices and present value is crucial to understanding financial markets. When the present value of an asset is greater than its market price, the asset is considered undervalued and may be a good investment opportunity. On the other hand, when the market price is greater than the present value, the asset is considered overvalued and may not be a wise investment choice. By analyzing market prices and present value, we can identify investment opportunities and make informed decisions about our portfolios.

I found some problems quite interesting:

Part 3

Find the Present Value (PV) of the target savings for the following.

Week 3: Discounting and Compounding

I found our third week of studying Discounting and Compounding to be incredibly interesting. Here are the three main takeaways:

  • Discounting and compounding are two key concepts that help us understand the time value of money.

  • The discount rate is a critical component of discounting and compounding. It represents the rate of return that investors require to compensate them for the risk of an investment.

  • Discounting and compounding can be used in a variety of financial calculations, such as net present value (NPV) and future value (FV).

I found some problems quite interesting:

Part 5

Find the effective annual interest rate for the following

Overall, my learning journey in Foundations of Modern Finance I was challenging and interesting, throughout the course we learned to apply our knowledge through various case studies and real-world examples. This hands-on approach allowed me to apply the concepts I learned to real-world situations and develop a deeper understanding of finance.I am excited to continue exploring this fascinating field and applying what I have learned to my future endeavors in finance.

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