EPOKA UNIVERSITY
FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES
DEPARTMENT OF BANKING AND FINANCE
COURSE SYLLABUS
2024-2025 ACADEMIC YEAR
COURSE INFORMATIONCourse Title: INTRODUCTION TO FINANCE |
| Code | Course Type | Regular Semester | Theory | Practice | Lab | Credits | ECTS |
|---|---|---|---|---|---|---|---|
| BAF 104 | B | 2 | 3 | 0 | 0 | 3 | 5 |
| Academic staff member responsible for the design of the course syllabus (name, surname, academic title/scientific degree, email address and signature) | Dr. Nertil Mera nmera@epoka.edu.al |
| Main Course Lecturer (name, surname, academic title/scientific degree, email address and signature) and Office Hours: | Dr. Nertil Mera nmera@epoka.edu.al , Thursdays (09:30 - 12:00) |
| Second Course Lecturer(s) (name, surname, academic title/scientific degree, email address and signature) and Office Hours: | NA |
| Language: | English |
| Compulsory/Elective: | Compulsory |
| Study program: (the study for which this course is offered) | Bachelor in Banking and Finance (3 years) |
| Classroom and Meeting Time: | Thursday, E-213 (11:40) |
| Teaching Assistant(s) and Office Hours: | NA |
| Code of Ethics: |
Code of Ethics of EPOKA University Regulation of EPOKA University "On Student Discipline" |
| Attendance Requirement: | |
| Course Description: | Primary emphasis is given on financial markets and tools and skills required to understand how those markets work. Finance and the role of financial system (including banks, other financial intermediaries and central bank) to the nation’s economy will be also discussed. Investment is another important discipline, which will be thoroughly discussed. Savings, interest rates and the flow of funds will be of special importance. |
| Course Objectives: | To equip the students with the foundations of knowledge that relate to finance; financial markets; investment instruments and evaluation of their performance. |
|
BASIC CONCEPTS OF THE COURSE
|
| 1 | Definition and Scope of Finance: Understanding finance as the management of money, assets, and investments, and its three main areas: personal, corporate, and public finance. |
| 2 | Financial Systems and Markets: Exploring the components of the financial system (financial institutions, markets, instruments, and regulations) and their roles in the economy. |
| 3 | Time Value of Money (TVM): Learning how to calculate present and future values of cash flows, and applying concepts like compounding, discounting, and annuities. |
| 4 | Risk and Return: Understanding the relationship between risk and return, measuring risk using variance and standard deviation, and exploring portfolio diversification. |
| 5 | Interest Rates and Inflation: Analyzing how interest rates are determined, the term structure of interest rates, and the impact of inflation on financial decisions. |
| 6 | Financial Institutions and Banking: Differentiating between commercial and investment banking, and understanding the structure, regulation, and functions of banks. |
| 7 | Securities and Valuation: Valuing financial securities such as bonds and stocks, and understanding the factors that influence their prices. |
| 8 | Capital Markets and Investment: Exploring the role of capital markets in facilitating savings and investment, and understanding the types of securities traded in these markets. |
| 9 | International Finance: Understanding currency exchange markets, exchange rate determinants, and the role of international banking in global trade. |
| 10 | Financial Crises and Regulation: Analyzing the causes and impacts of financial crises (e.g., 2007–2008) and the role of regulation in maintaining financial stability. |
|
COURSE OUTLINE
|
| Week | Topics |
| 1 | Introduction to the Course and Review of syllabus, Presentation of Study Materials (Book), Evaluation Method, Brief Presentation on Key Issues |
| 2 | Chapter 1: (The Financial Environment) - This chapter provides a foundational understanding of finance, defining it as the management of money and assets. It explores the three key areas of finance—personal, corporate, and public—and highlights the importance of studying finance in making informed financial decisions. The chapter introduces the six principles of finance, which guide financial decision-making, and outlines the four components of the financial system, explaining their roles in the economy. (pg. 3-20) |
| 3 | Chapter 2: (Money and the Monetary System) - This chapter explores the financial environment, starting with the causes of the 2007–2008 financial crisis. It explains how money flows from savers to businesses, outlines the components and functions of the monetary system, and traces the evolution of money in the U.S. It also covers money market securities, M1 and M2 money supply, their links to economic activity, and developments in the international monetary system. (pg. 21-44) |
| 4 | Chapter 3: (Banks and Other Financial Institutions) - This chapter examines the impact of the financial crisis on financial institutions and identifies their key roles in the financial system. It differentiates between commercial and investment banking, explores the functions of banks, and traces the historical development of the U.S. banking system. The chapter also covers banking regulations, depositor protection, and the structure of banks, including charters, branch banking, and holding companies. It analyzes bank balance sheets, management practices like liquidity and solvency, and the importance of bank capital. Finally, it highlights characteristics of foreign banking systems for a global perspective. (pg. 45-75) |
| 5 | Chapter 6: (International Finance and Trade) - This chapter explores the evolution and current operation of the international monetary system, including efforts toward European economic unification. It explains how currency exchange markets function, how exchange rates are quoted, and the factors influencing them. The chapter also highlights key considerations for international business and the role of international banking systems in facilitating trade. Finally, it discusses recent developments in U.S. international transactions, providing insights into global financial dynamics. (pg. 130-162) QUIZ NR:1 |
| 6 | Chapter 7: (Savings and Investment Process) - This chapter examines the components of GDP and the federal government’s revenue and expenditure sources. It explains how savings are generated, their major sources in the U.S., and the factors influencing them. The chapter also covers key capital market securities that support savings and investment, as well as mortgage loan types and how mortgage markets enable homeownership. (pg. 165-189) |
| 7 | Review for Midterm Exam |
| 8 | MIDTERM EXAM |
| 9 | Chapter 8: (Interest Rates) - TThis chapter explores how interest rates respond to changes in the supply and demand for loanable funds and breaks down the components of market interest rates. It covers U.S. Treasury securities, their types, and ownership, and explains the term structure of interest rates using three key theories. The chapter also discusses historical and recent price movements, types of inflation, and the concepts of default risk and risk premiums, including how they are measured. (pg. 190-217) |
| 10 | Chapter 9: (Time Value of Money) - This chapter introduces the concept of the time value of money and simple interest. It explains the processes of compounding to calculate future values and discounting to determine present values. The chapter also covers how to find interest rates and time requirements for compounding and discounting problems. It defines annuities, detailing how to calculate the future and present values of ordinary annuities, as well as periodic payments. Additionally, it explores calculations for periods less than one year and methods to estimate the cost of consumer credit. (pg. 218-252) |
| 11 | Chapter 10: (Bonds and Stocks: Characteristics and Valuations) - This chapter explores the major sources of external long-term financing for corporations, including bonds and stocks. It discusses the global bond market, bond covenants, and ratings, while comparing corporate bond characteristics like security, maturity, and income return. The chapter also covers preferred and common stock features, dividend issuance processes, and differences between cash dividends, stock dividends, and share repurchases. Finally, it explains the valuation of financial securities, focusing on bonds and stocks, and examines economic and industry factors influencing stock prices. (pg. 252-297) |
| 12 | Chapter 11: (Securities and Markets) - This chapter explains how businesses distribute new securities through primary markets, including underwriting and best efforts agreements. It highlights the costs of "going public" and the role of investment banks in facilitating offerings. The chapter also covers secondary markets, organized exchanges like the NYSE, and over-the-counter markets. It discusses trading orders, factors that create efficient markets, and the role of brokerage commissions. Additionally, it explores security market indexes, trading foreign securities, and the importance of ethics in securities transactions and analysis. (pg. 298-341) |
| 13 | Chapter 12: (Financial Return and Risk Concepts) - This chapter teaches how to calculate arithmetic averages, variance, and standard deviation for a single financial asset. It explores sources of financial risk and uses scenario analysis to compute expected returns and variance. The chapter summarizes historical returns and risks for various securities and explains market efficiency and its three forms. It also covers portfolio expected returns, risk reduction through diversification and correlation, and distinguishes between systematic and unsystematic risk. Finally, it introduces the Capital Asset Pricing Model (CAPM) and the role of beta in measuring risk. (pg. 342-377) |
| 14 | Review for Final Exam |
| Prerequisite(s): | NA |
| Textbook(s): | Introduction to Finance, Markets, Investments, and Financial Management, Wiley (16th Edition), RONALD W. MELICHER and EDGAR A. NORTON |
| Additional Literature: | Foundations of Finance, Pearson (10th Edition), Arthur J. Keown, John D. Martin, J. William Petty |
| Laboratory Work: | No |
| Computer Usage: | Yes |
| Others: | No |
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COURSE LEARNING OUTCOMES
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| 1 | Define finance, explain its three main areas, and describe the principles and components of the financial system. |
| 2 | Analyze the causes of the 2007–2008 financial crisis and explain the role of money, financial markets, and monetary systems in the economy. |
| 3 | Describe the structure, functions, and regulation of financial institutions, including commercial and investment banking. |
| 4 | Explain the operation of currency exchange markets, factors affecting exchange rates, and the role of international banking in global trade. |
| 5 | Identify the components of GDP, explain the savings and investment process, and describe the role of capital markets and mortgage systems. |
| 6 | Explain how interest rates are determined, describe the term structure of interest rates, and analyze the impact of inflation and default risk. |
| 7 | Apply the concepts of compounding, discounting, and annuities to calculate present and future values of cash flows. |
| 8 | Compare the characteristics of bonds and stocks, explain how they are valued, and describe the factors influencing their prices. |
| 9 | Describe the processes of issuing and trading securities in primary and secondary markets, and explain the role of investment banks and market efficiency. |
| 10 | Calculate risk and return for individual assets and portfolios, and explain the principles of diversification and the Capital Asset Pricing Model (CAPM). |
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COURSE CONTRIBUTION TO... PROGRAM COMPETENCIES
(Blank : no contribution, 1: least contribution ... 5: highest contribution) |
| No | Program Competencies | Cont. |
| Bachelor in Banking and Finance (3 years) Program | ||
| 1 | The students gain the ability to look at the problems of daily life from a broader perspective with an increased awareness of the importance of moral/ethical considerations and professional integrity in the workplace. | |
| 2 | They develop their knowledge and understanding of banking and finance including concepts, theories, and analytical tools that serve both in national and international markets. | |
| 3 | They gain an understanding of the role of financial management in business firms and the essentials of corporate finance and further develop their knowledge in the field. | |
| 4 | They are able to apply valuation models to estimate the price of different financial assets, measure risk and describe the risk-return tradeoff. | |
| 5 | They are provided with the knowledge and understanding of the regulatory framework and functioning of banking system and central banking as well as international banking system. | |
| 6 | They are able to understand and use fundamental economic theories and tools to solve economic problems in banking and financial services industry. | |
| 7 | They have the ability to develop and utilize accounting, financial and economic data as well as other information to solve different business problems by making use of basic mathematical and statistical models. | |
| 8 | They are expected to develop their numerical and IT skills as well as knowledge of databases in order to address the significant development in the delivery and use of financial services known as FinTech. | |
| 9 | They develop their ability to think critically, do research, analyze, interpret, draw independent conclusions, and communicate effectively, both individually and as part of a team. | |
| 10 | They are provided with opportunities to acquire the necessary skills and competencies to develop professionalism in the banking and financial services industry or to move on to further study within the discipline. | |
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COURSE EVALUATION METHOD
|
| Method | Quantity | Percentage |
| Midterm Exam(s) |
1
|
30
|
| Quiz |
1
|
10
|
| Final Exam |
1
|
50
|
| Attendance |
10
|
|
| Total Percent: | 100% |
|
ECTS (ALLOCATED BASED ON STUDENT WORKLOAD)
|
| Activities | Quantity | Duration(Hours) | Total Workload(Hours) |
| Course Duration (Including the exam week: 16x Total course hours) | 16 | 3 | 48 |
| Hours for off-the-classroom study (Pre-study, practice) | 16 | 3 | 48 |
| Mid-terms | 1 | 9 | 9 |
| Assignments | 0 | ||
| Final examination | 1 | 10 | 10 |
| Other | 1 | 10 | 10 |
|
Total Work Load:
|
125 | ||
|
Total Work Load/25(h):
|
5 | ||
|
ECTS Credit of the Course:
|
5 | ||
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CONCLUDING REMARKS BY THE COURSE LECTURER
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|
This course has provided a foundational understanding of key financial concepts, tools, and practices essential for making informed financial decisions. Whether you pursue a career in finance or apply these principles in your personal life, the knowledge gained here will serve as a stepping stone for further exploration and success in the dynamic world of finance. |