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Over the past fifteen years we have seen an enormous increase in the theoretical and empirical literature in the field of finance. This outpouring of academic research has had a substantial impact on the content of finance courses including the introductory course. However, the changes in content at the introductory level appear to me to have been evolutionary rather than revolutionary. Textbooks contain more analytical and theoretical material, but this material is provided within traditional structures. The contents of the chapters have changed but not the titles of chapters nor the sequencing. With minor changes in wording I would guess that course outlines of today appear little different from those of ten years ago. I am not particularly disturbed by these observations, but I believe it is time to take a close look at what we are doing to our students, and I would like to explore the possibilities of a more coherent approach to the introductory course.

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TIONS." Although any papers which fit into the general topic area will be considered, highest priority will be given to papers dealing with the management of financial institutions. We would like to see papers which apply developed theory to the problems facing the managers of financial institutions. Papers developing new theory with potential application or those which present actual applications are included in this priority. The intent is to develop the link between theory and practice as much as possible within the general confines of the topic area.

The continuing discussion on the cost of capital and related Issues has tended to focus on the capital market conditions, necessary to guarantee the validity of particular conclusions Works by F Modlgllani and M. H. Miller [4, 5, 6] and J Lintner [2], for example, are developed in this manner. The following discussion is developed from the standpoint of a firm borrowing funds in an uncertain world. An example expressed in terms of an individual borrower begins the analysis. The aim is to suggest a different approach to the capitalization and costing of contractual obligations (debt) than those current in both the theoretical and applied literature. A model is developed which expresses the cost of debt to the borrower as a function of both the expected rate and the promised rate of the debt contract. Using this analytic structure, the relationship between the two rates and the Implications of using either one as the cost of debt to the firm are explored. An hypothesis as to the behavior of the borrower (management and shareholders) provides a third expression for the cost of debt which is suggested to be superior to either alternative.

Charles W. Haley, The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets: A Comment, The Review of Economics and Statistics, Vol. 51, No. 2 (May, 1969), pp. 220-221