Whilst many undergraduate finance textbooks are largely descriptive in nature, the economic analysis in most graduate texts is too advanced for latter year undergraduates. This book bridges the gap between these two extremes, offering a textbook that studies economic activity in financial markets, focusing on how consumers determine future consumption and on the role of financial securities. Areas covered in include: an examination of the role of finance in the economy using basic economic principles, eventually progressing to introductory graduate analysisa microeconomic study of capital asset pricing when there is risk, inflation, taxes and asymmetric informationan emphasis on economic intuition using geometry to explain formal analysisan extended treatment of corporate finance and the evaluation of public policy.