This is a relatively well-written undergraduate-level text that can be read/understood without the need for classroom instruction. It is especially useful for self-study by ordinary people who know nothing at all about finance theory but are motivated to learn. The reader will find all of the main topics covered: cash flows, efficient market hypothesis, capital asset pricing model (CAPM), risk management, hedging, and options pricing at Black-Scholes (B-S) level of discussion. In the spirit of the simple level of the text, the B-S equation is applied but not derived (best derivation is still the second one, and the Black's original method starting from the CAPM, in the famous 1973 Black-Scholes paper). `Fat tails' (known and largely ignored since Mandelbrot, 1962) and non-risk-neutral hedges, the frontiers of modern finance theory, are not discussed. Throwing the traditional `financial-engineering' bone in the direction of fat tails, implied volatility is discussed because in practice fat tails can't any longer be ignored. All in all, the book is recommendable to physics grad. students who want to learn finance terminology along with the main (wrong) ideas believed by the finance theory community. As an example of the book's weaknesses, the authors assume that the vague, undefined notion of `fundamental value' makes sense, and that liquid markets are in some vague, undefined sense `efficient' although the notion of a relaxation time is never mentioned. Typical finance theorists' shortcomings aside, this book can profitably be read before (or at least parallel with) Hull and other harder texts on derivatives. Liars' Poker and Fiasco can also be read profitably in parallel with this book. No knowledge of neo-classical ('marginal utility') econ (as is excesively taught in Samuelson's standard text) is required, and is at any rate is useless for finance theory/practice.

20 of 23 found the following review helpful:


This book should not be used for graduate level study  Sep 14, 2002
I was required to purchase this book for an MBA class in Business Finance. To put it simply, this book is terrible. There are errors in calculations from front cover to back. The describers used to name calculations are changed from page to page, without any consistency whatsoever, requiring a flow chart to understand what it is Bodie and Merton are discussing. Nobel prize or not, Mr. Bodie and Mr. Merton should be embarrassed to publish such trash.

Also, the way the questions are worded in the end of chapter reviews leave little relevance to what was taught in the preceding pages. Often questions that are asked are open-ended and very ambiguous.

I would not recommend this book to anyone and have asked my University to stop using this book because it is so flawed.

13 of 14 found the following review helpful:


Riddled with errors  Jul 09, 2002
I am an MBA student-this was one of the worst textbooks I think I have ever had the misfortune to use. It was riddled with errors, which took me an hour to transcribe from the publisher's website. My entire class was confused by the end of chapter questions, which in some chapters seemed to have no connection to what was taught in the chapter. I and everyone else in my class wondered all along the way if we could trust what we were reading as being accurate. Stay away from this if you value your time and your sanity.

8 of 9 found the following review helpful:


Thumbs part way up  Nov 08, 2002 By Buce
Like others, I too first saw this book in paper. I am now using it to teach a class of law students -- smart kids but mostly without great numeracy. I think it is working okay but (like so many coursebooks?) perhaps not as well as expected. One problem is indeed the typos -- I'm a sloppy writer myself and typos are my incubus, but with all the beta testing and with all the publisher support, you would think they could have done better (indeed, I sent my own list to the publisher back in the beta days -- I got a nice thank you but I don't see my name in the acknowledgments, so I suspect they hit the trash). Aside from that -- the presentation seems mostly clean and straightforward, but quite often too elliptical for my students -- I've felt I had to do a lot of backgrounding. Unlike other reviewers, I quite like the problems -- I think some of them press the envelope a bit, but that is just fine with me, exactly what they should do. I do feel that the authors bring together a remarkable lot of stuff in a compact and orderly manner. In this respect with this book as with so many other coursebooks, perhaps it is the case that the teacher is getting more out of it than the student.

15 of 20 found the following review helpful:


This book was reviewed very favorably in the Financial Times  May 03, 1998
"Have you seen the new Finance textbook?" The query making the rounds of business schools these days is uttered with such reverence that the question might as well be: "Have you seen the light?" Robert Merton, who shared last year's Nobel prize for economics, and Zvi Bodie, a professor at Boston University's business school, have penned what is being hailed as the definitive book in the field of finance. "This textbook will change the way finance is taught at business schools around the world," says James Angel, professor at Georgetown University's school of business. The eminent economist Paul Samuelson, who taught both authors when they were students at the Massachusetts Institute of Technology and wrote the foreword to the book, calls it an "innovative work that sets a new pattern of excellence"...

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