Ethics and the Introductory Finance Course

Morris G. Danielson; Amy F. Lipton

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Ethics and the Introductory Finance Course

Morris G. Danielson and Amy F. Lipton

Saint Joseph's University, USA

Volume 7: 2010, pp. 85-102: ABSTRACT

This paper discusses how the teaching of ethics can be interwoven with the most basic concept in finance: time value of money. Although valuation formulas yield precise numerical answers, they require many assumptions about future economic conditions. If decision-makers use false information or erroneous assumptions, they will arrive at an incorrect value estimate, even if the calculations are performed correctly. Thus, the valuation process can be manipulated by unscrupulous participants. This concept is illustrated with references to recent events. Examples appropriate for classroom use are included in an appendix.