Discussion Essays: 1

Calculate expected return, variance and standard deviation for portfolios. Consider correlation coefficient and covariance for pairs of stocks and evaluate investment attributes.

Describe the market value of equity and calculating company beta and the yield on 3-month Treasury Bills. Use the CAPM to estimate the company cost of equity.

Assignment 2

Discussion Essays: 2

Describe the relationship between the number of assets in a portfolio and its variance, the components of risk of a security, the role of diversification, the "Capital Market Line" and the "Security Market Line". Evaluate portfolios using the efficient frontier of Markowitz. Estimate company covariance with the S&P500 and use regression analysis to estimate company beta.

Describe the Modigliani & Miller (M&M) theory and the optimal capital structure. Discuss how financial distress costs and agency costs affect M&M's theory. Calculate company market value and cost of equity capital. Construct investment strategies and evaluate the risk of equity.

Assignment 3

Discussion Essays: 3

Describe the "agency problem" and the Sarbanes-Oxley Act. Discuss the dominant compensation philosophy, share value creation and the link between company size and executive pay. Solve Parmalat's case, which may be found in reading No. 8. Agency Theory may be used to describe the behaviour of company management and the relation of managers with shareholders.

Assignment 4

Final paper: CAPM and Capital Structure (2500 words max)

Reflect on the course materials with specific focus on the last two papers (Sharpe; Modigliani & Miller). Synthesize the key points they're making and consider the challenges of such points in a given context within your environment. Be sure to consider the following factors in the implementation: cultural, globalization, government, and environment.