Finance 4200 Fundamentals of Investments
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Finance 4200 Fundamentals of Investments Dr. MacDonald Office Hours T-TH 11-12:30; 2:00-3:00 T-TH BLB 329D: 940-565-3072 Internet: [email protected] Course Objectives: Topics to be covered in this course include the institutional structure of securities markets, fundamental analysis of securities, market efficiency, portfolio management and the principles of investing in various types of securities, with primary emphasis on common stocks and bonds. Prerequisites: Completion of FINA 3770 or an equivalent level corporate finance course is required with a grade of C or better. A first level course in financial accounting is also required. Text: Fundamentals (Essentials) of Investments: by Bodie, Kane and Marcus, McGrawiHill/Irvin, 9th Edition. Supplementary Materials: The Wall Street Journal, Dow Jones and Company. The Nightly Business Report, PBS, Bloomberg, CNN Wall Street Week, PBS Barrons, Forbes, Fortune, Business Week and related materials. Exams: Exams will cover the material assigned in class. There will be two mid-term exams during the semester and a final exam. The final exam is cumulative. Tests will consist of multiple choice questions, short answer, problem and essay type questions. If you must miss an exam without prior arrangements, you must take a comprehensive make-up exam on or before the last regularly scheduled day of class prior to finals. SIG Particpation: Each student enrolled in Finance 4200 must participate in the Student Managed Investment Fund /Student Investment Group (SMIF/SIG). The SIG is made possible through the generous financial support of Colonel Guy M. Cloud of Austin Texas. This fund is intended as a teaching aid for UNT students interested in learning more about investments. The SIG provides for the creation of a student organization which, with the supervision of faculty advisors, will buy and sell stocks and other securities on the open market allowing them to put into practice the theories and principles learned in the classroom. Future earnings from this student-managed fund will provide much-needed scholarships for students majoring in selected fields within the College of Business Administration. For more information on SIG please see the following WEB site, orgs.unt.edu/sig. Each student’s participation in SIG constitutes 10 points of your final grade. Individual students can choose to participate in one of three ways. (i). Each student enrolled in Finance 4200 must attend a majority (at least 50% or more) of the SIG meetings held during the regular semester. Active involvement is also required in one or more of the SIG subcommittees. Information on SIG is provided in the above WEB site and more information will be provided to you by the BOD of SIG at the first organizational meeting (see the WEB cite for location details). or (ii). For students unable to attend the SIG general meetings, participation in the activities assigned to a subcommittee will also meet the general SIG participation requirement. The chair of each subcommittee makes the sole determination of whether a student was actively enrolled and participating within the subcommittee. or (iii). For students unable to meet the general and subcommittee duties assigned by SIG, a comprehensive Investment Fund Proposal (IFP) will be submitted to the instructor on or before October 1, 2015. Each report will consist of not more than 10 typewritten double spaced pages and I will forward all received IFPs to the SIG/BOD for their consideration and possible presentation to the general assembly of the SIG. Each IFP must include the following components for credit. The student must define an investment goal consistent with those of the SIG (see the WEB site above). The current goals and objectives include long range growth, preservation of capital and ultimately the provision of scholarship awards for UNT students. Each report must contain a summary of the goal and objective of the fund, a market analysis and a list of transactions consistent with fund objectives. The IFP must clearly define how the transactions chosen support the vision, goals and mission of the SMIF/SIG. Supporting documentation is required for successful completion of the project. At the end of the semester, or as required throughout the semester, a comprehensive report on how the individual IFP performed must be provided. iv. A completed Bloomberg certificate or CFA Ethics Option can also be complete (more information to be distributed at a later time). For additional details or information not provided in the WEB site above, please see me. As a guide also see the back page of this syllabus for additional details. Grades: The grades will be based on a 510 point scale determined as follows: Midterm exams -- 300 points Final exam -- 200 points SIG participation -- 10 points (Bloomberg/CFA) ---------------- Total -- 510 total points Calculators: You may use a calculator (of your choice) on the midterm exams and the final exam. A reference sheet with anything written on it that you want is also allowed on the midterm and final exam. The reference sheet must be an index card or one piece of standard 8.5 x 11 paper-no xerox copies of other students reference sheets are allowed. Problems: You are expected to read the assigned chapters before each class session begins (see the attached sheet). Review problems and exercises will also be distributed in class to be worked outside of class. These problem may often require the use of Excel/Lotus 123 (which is available in the PC Applications Lab). Although the problem sets will not be collected and graded for credit, you will find that the midterm and final exams will be related to these problem sets. If you require assistance please come see me or attend the Finance tutorial lab (see the main office for the tutorial lab schedule). Attendance: You are expected to adhere to University policy regarding attendance. I require that each student arrive at class on time and leave class on time. Any student who, without a valid reason, does not adhere to the attendance requirement shall have a letter grade reduction for each occurrence. Continued abuse of this policy will lead to that student being administratively dropped from class. Incomplete: I will adhere to University policy regarding the assignment of a grade of Incomplete. Unless you are in compliance with University policy do not ask me to assign a grade of incomplete. Disabled Students: I comply with the Americans with Disabilities Act in making reasonable accommodation for qualified students with disability. If you have an established disability as defined in the Americans with Disabilities Act and want to request accommodation, please see me as soon as possible. Academic Ethics: Make certain that you maintain a high level of ethical conduct in this course. Any evidence of an act of academic dishonesty will result in an automatic F and expulsion from this course. Please adhere to University policies and the UNT Code of Conduct and Discipline with respect to academic ethics and honesty. Finance 4200 Tentative Course Outline Chapters Unit 1: The Investment Environment 1 Asset Classes and Financial Instruments 2 How Securities are Traded 3 Appendix Time Value of Money Types of Fixed Income Securities 14 Fundamentals of Bond Valuation 14 cont. Term Structure of Interest Rates 15 Managing Bond 16 Assessing Risk and Return 5 Riskless Assets, CAPM, Index Models 6 and 9 Optimal Risky Portfolios 7 Empirical Evidence on Security Returns 12 and 13 Equity Valuation Models 17, 18 Financial Statement Analysis 19 Option Valuation 20, 21 Hedge Funds 26 Cumulative Final Exam FINANCE 4200 Investment Fund Propsal You start with an initial investment of say $1,000,000. You are to invest the fund in a manner consistent with the objectives which have been established beforehand by the constitution and bylaws of SIG (see the above WEB site for details). You may invest in stocks, bonds, and other securities as permitted by the SIG agreement. Commissions as shown in the schedule below must be paid for each transaction. 100 shares of stock, or 5 bonds each counts as a round lot. No odd lot trades are allowed. (Note: If you wish to use actual commissions from a brokerage firm, you may do so. Submit a copy of the commission schedule with your transactions.) Commission Schedule Number of shares 100 200 300 400 500 Commission $30 $50 $60 $70 $80 On or before October 1, +2014 you must turn in: 1. A comprehensive statement of your assessment of the financial markets for the rest of this calendar year. Place emphasis on the stock market and any other markets you are considering placing your investment fund. Cite the references you have used to formulate your view. 2. The objectives of your fund. Objectives must, at a minimum, address both risk and return considerations. Further, the goals and objectives of the fund must be consistent with those of SMIF/SIG. 3. A list of your initial transactions. Initial transactions will be based on closing prices as of close of on a given trading day prior to 10/1/15 (Use additions of the Wall Street Journal or other sources.) Your transactions must be consistent with your stated objectives. For each transaction, state the reason(s) for it and the source(s) of information upon which the decision was based. You may turn in changes in your portfolio on any weekday between initiation and liquidation. Each time you turn in a transaction, you must deduct the commission for both sales and purchases. State the reason(s) for each transaction and the source(s) of information upon which it was based. On or before December 1, 2015 you must liquidate your fund. On or before the last regularly scheduled class period you must turn in a summary and analysis of the performance of your fund.