FNCE30001 Investments
The Complete Exam Bible · S1 2026Investments
Investments is the University of Melbourne's third-year finance core — a fixed-income-first subject that runs bonds, the term structure, duration and convexity before risk and return, portfolio theory, the CAPM and market efficiency. The final exam is 50% of your grade in a single comprehensive 2-hour sitting, and it is closed-book with a provided, non-detachable formula sheet — the sheet hands you the equations, so the marks live in which model to reach for, how each formula is derived, and what the number means. This guide drills exactly that: every model on one recurring answer shape — identify the model → set up the formula → compute → interpret / decide.
What FNCE30001 covers
Seven exam chains, fixed-income first → one exam-ready map. Each links to its free chapter guide.
How FNCE30001 is assessed
| Component | Weight | Format |
|---|---|---|
| Final examination | 50% | Comprehensive, 2 hours, closed-book with a provided non-detachable formula sheet (Casio FX-82, show all working) · formal exam period |
| Mid-semester test | 25% | ~Week 7 · multiple choice on Modules 1–5 (fixed income through the CAPM) |
| Group case studies | 25% | Two group presentations (Case Study 1 ~10% + Case Study 2 ~15%) — confirm the exact split in your subject guide |
Pricing a coupon bond — the centrepiece calculation, mark by mark
- +1Model: an annual coupon bond — price is the PV of the level coupon stream (an annuity) plus the PV of face: P = (C/y)[1 − (1+y)−n] + Par/(1+y)n.
- +1Inputs: C = $6, y = 5% = 0.05, n = 5, Par = $100. Check the period basis first — this is annual, so no halving.
- +1PV of coupons: (1.05)5 = 1.27628, annuity factor = (1/0.05)(1 − 1/1.27628) = 4.32948, so PV = 6 × 4.32948 = $25.98.
- +1PV of face: 100 / 1.27628 = $78.35.
- +1Price: 25.98 + 78.35 = $104.33.
- +1Decide: the coupon (6%) exceeds the yield (5%), so the bond trades at a premium (P > Par) — you pay above par to collect above-market coupons.
Key terms
- Yield to maturity (YTM)
- The single discount rate that makes the present value of a bond's cash flows equal its price — the bond's internal rate of return if held to maturity with coupons reinvested at that rate. It equals the coupon rate only when the bond trades at par, and moves with the market price every day.
- Duration
- The present-value-weighted average time to a bond's cash flows; modified duration D* = D/(1+y) turns it into the first-order percentage price sensitivity to a yield move, %ΔP ≈ −D*Δy. Longer maturity and lower coupon raise duration; a zero-coupon bond's duration equals its maturity.
- Systematic risk
- Market-wide risk — a rate decision, a recession, a commodity cycle — that hits every asset together and cannot be diversified away. It is the only risk the market rewards, and the CAPM measures it with beta. Firm-specific (unsystematic) risk averages out across a portfolio and earns no premium.
- Sharpe ratio
- Reward per unit of total risk: (E[r] − r_f) / σ — the slope of the capital allocation line. Use it when the portfolio is the investor's whole risky holding. Its cousin the Treynor ratio divides the same excess return by beta instead, for a fund held as one sleeve of a diversified portfolio.
- Alpha
- The gap between a stock's actual expected return and the CAPM-required (fair) return for its beta: α = E[r] − [r_f + β(E[r_M] − r_f)]. Positive alpha plots above the security market line — under-priced, a buy; negative alpha is over-priced. In equilibrium every alpha is zero.
FNCE30001 FAQ
Is FNCE30001 hard?
It is calculation-dense and front-loaded with fixed income, which many students find the toughest block. The difficulty is precision under exam time: the same handful of models — bond pricing, duration, two-asset risk-return, the CAPM, performance ratios — recur on fresh numbers, so the work is making each one automatic on the four-step answer shape. The comprehensive 50% final concentrates the stakes on one paper.
How is FNCE30001 assessed?
The final exam is 50% in a single comprehensive 2-hour sitting, closed-book with a provided, non-detachable formula sheet and a Casio FX-82 only. The rest is a mid-semester test (about 25%, multiple choice on Modules 1–5, around Week 7) and two group case studies (about 25% combined). Confirm this year's exact weights and dates in your subject guide and on Canvas.
What is on the FNCE30001 final exam?
Five recurring chains carry most of the marks, skewed to fixed income: price a bond and back out a YTM or zero rate; use duration and convexity to predict a price change or immunise; build a two-asset risk-return / GMV / Sharpe answer; apply the CAPM and the SML to get an alpha and a buy/sell call; and rank funds with the performance measures. EMH forms, behavioural biases and microstructure are reasoned in words.
Is the exam open or closed book, and what does the formula sheet give me?
It is closed-book, but a formula sheet is provided and it is non-detachable. The sheet hands you the equations — bond price, duration, convexity, forwards, covariance, the Sharpe ratio, the CAPM, the index and multifactor models. What it cannot give you is which formula to use, how each is derived, and how to turn the number into a decision; that is where the marks are, and what this guide drills.
Is using AskSia for FNCE30001 cheating?
No. AskSia is a study reference written in our own words — we host none of your lecturer's files, and every worked example uses our own invented numbers, tickers and dates, never the assessed case studies or the mid-semester test. Sia teaches you the method to earn the marks; it does not complete or sit your assessments.
How to study for the exam
Treat the fixed-income block as the grade-decider: bonds, the term structure, duration and convexity are taught first, are the heaviest examinable block, and appear on both the mid-semester test (Modules 1–5) and the comprehensive final — so the bond pricing you learn in Week 1 is still worth marks in the exam. Drill the five recurring chains until they are automatic on the same answer shape: identify the model → write the formula before the numbers → substitute and show every intermediate quantity → convert the number into a decision (premium/discount, buy/sell, which fund, efficient/inefficient). Markers pay for the formula line and the decision sentence as much as the final digit, and a correct number with no working scores zero — so practise showing the full working by hand on a Casio FX-82.
