RSM230 Financial Markets Study Guide: Present Value to Market Efficiency
Practice RSM230 on Rottly with exam-style questions and explanations.
See RSM230What RSM230 is
The calendar describes RSM230 as an introduction to Canadian and international financial markets: the major institutions, the markets themselves, the securities traded in them, and an introduction to valuing and trading those securities, including stocks and bonds and some derivatives. It is normally taken in first year and is not eligible for CR/NCR.
How it is graded in Fall 2026
From the published Fall 2026 outline: ongoing quizzes 15%, syllabus quiz, survey and video introduction 1% each, individual essay 1 4% (September 29), group project team charter 1% (October 6), group project part 1 3% (October 23), group project part 2 2% (November 6), midterm test 10% (Monday, November 9), individual essay 2 4% (November 27), reflection on the essays 2% (December 7), and a final examination worth 45%. The listed components add to 89%; the outline's schedule covers the rest. Your section's syllabus is the authority.
Two things follow. The final is almost half the course, so the material from after the midterm (portfolios, options, funds, banking, efficiency) matters as much as the valuation material before it. And the small ongoing pieces, quizzes plus the September deliverables, add up to roughly a fifth of the mark for very little work.
The valuation half (weeks 1 to 7)
Present value. Everything in the first month is one idea: a dollar later is worth less than a dollar now, and the discount rate says how much less. Learn to move between PV and FV in both directions before touching anything else.
Net present value. NPV is the present value of all cash flows, including the negative one at time zero. Accept if positive. The usual exam variants: uneven cash flows, a project with a salvage value, and comparing two projects with different lives.
Perpetuities and annuities. Four formulas carry most of the marks: level perpetuity, growing perpetuity, level annuity, growing annuity. Know when payments start at time 1 versus time 0 (annuity due), because that one-period shift is the most common slip.
Compounding and returns. Effective annual rate versus APR, continuous compounding, and holding-period versus annualized returns. If a question gives a monthly rate and asks for an annual figure, it is testing whether you compound rather than multiply.
Bonds and stocks. Bond price as the PV of coupons plus face value; yield to maturity; the inverse relationship between price and yield. Stock price as the PV of dividends; the dividend discount model with constant growth; price-earnings ratios. Rottly's RSM230 course has timed practice exams built around exactly these computations.
The markets half (weeks 8 to 12)
Portfolios. Expected return of a portfolio is a weighted average; its risk is not, because of correlation. Diversification, systematic versus unsystematic risk, beta, and the capital asset pricing model.
Options and derivatives. Calls and puts, payoff diagrams at expiry, intrinsic versus time value, and what forwards and futures are for. Draw the payoff diagrams until they are automatic.
Investment funds. Mutual funds versus ETFs, management expense ratios, active versus passive, and why fees compound against you.
Banking. What banks do, how they make money, leverage, and why they are regulated.
Market efficiency. The three forms of the efficient market hypothesis and the evidence on each. Expect conceptual questions here rather than computations.
How to prepare
1. Do the Rottly quiz for each module the week it is taught; the ongoing quizzes in the course reward exactly that habit.
2. Before November 9, take a timed practice exam on the valuation material and redo every missed question from the mistake review.
3. After the midterm, do not coast: 45% of the course is still ahead, and the second half is more conceptual, which many students find harder to cram.
4. Keep one page of formulas you have derived yourself, not copied. If you can rebuild the annuity formula from the perpetuity formula, you will never misremember it.
AI in RSM230
The Fall 2026 outline takes a different line from most Rotman courses: it actively encourages students to learn about the responsible use of artificial intelligence and points to Microsoft Copilot, which is available to all U of T students, while warning that these tools can produce incorrect information. Read the policy on the outline itself before relying on any tool for graded work.