University Of Illinois At Urbana-Champaign

UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN College of Business D E P A R T M E N T O F F I N A N C E PRELIMINARY ITEMS ARE IN RED, AND WILL BE CHANGED WHEN KNOWN FINANCE 300 Financial Markets Spring 2011, Section N2 (CRN 40393) 9:30am – 10:50am, Tuesday-Thursday, 36 Wohlers Hall

Instructor: Kevin Waspi Office: 70-C Wohlers Hall Telephone: 244-7189 (Department of Finance Office 244-0252) Office Hours: Monday & Wednesday, 9:00am to 11am, by appointment otherwise e-mail: [email protected] (or [email protected] if you prefer to type eight letters rather than four) (Homepage: http://www.business.uiuc.edu/broker/waspi.htm)

Course Objective Introduction to the theories and applications associated with the functions of capital markets. This includes portfolio theory, risk management, and asset valuation. We will examine markets for equity, money, bonds, mortgages, futures, options and swaps.

Prerequisites Successful completion of Finance 221 Working knowledge of basic statistics and linear regression analysis Working knowledge of Excel or equivalent spreadsheet capability

Required Material E. Oltheten, K. Waspi; Financial Markets…, Stipes Publishers, First Edition, Fall 2006 Chapter reading assignments are to be completed prior to class. This is what pop quizzes will test!

Recommended Material Subscription to The Wall Street Journal (Bring your WSJ to class) Please see the above referenced text for recommended readings to enrich your knowledge of the subjects covered in this course. Course Requirements

1) Score of 70% or greater on the Assessment Exam (covering appropriate material from Finance 221) 2) Two investment analysis group projects, one equity, one debt. (maximum 4 students per group) 3) Finance 300 Investment Challenge Group Project (maximum 4 students per group) 4) In class “pop quizzes” 5) Three in class “mid-term” exams and weekly homework exercises on COMPASS. 6) Cumulative Final Exam

Grading Outline A total of 720 points will be used for grading the course. Letter grades using plus and minus will be assigned at the end of the term. Each of the three “mid-term” exams and the cumulative total of COMPASS homework points during the semester are 120 points. The three highest of these four scores will be used for course grading. The 8 highest pop quizzes will sum to a maximum of 40 points of the total. The cumulative Final Exam is 180 points. The equity group project and bond group project will each count 40 points. The Investment Challenge will count 60 points. Group projects are not accepted without a validly executed “Group Project Point Allocation Contract” attached. The contract will distribute the score of the project proportionately to each group member, (subject to a 10% cap) as group members direct. All members to the group must agree to the allocation, and if they do not, binding arbitration will direct the allocation. A student must have a passing average in both the group work and individual work components in order to receive a passing grade for the course. A failing average in either component will result in a failing grade for the course regardless of the overall average. For a complete breakdown of the point assignments see “Grading Criteria” on: http://www.cba.uiuc.edu/broker/waspi.htm

There will be no makeup exams, no exceptions. No late assignments will be accepted, no exceptions.

The Assessment Exam is given in room 7 DKH during specific exam times, starting Wednesday, January 19 and ending Thursday, January 27. You will fail the course if you score < 70% on this exam. You must register for your exam time using the reservation system at: https://www3.business.uiuc.edu/reservation/default.aspx?pcode=FINCERTSP11 Reservations are necessary to take the exam, and the seats fill quickly. Only one reservation is allowed per student at any one time. You are strongly encouraged to register for an early session in the event you do not score above 70% and need another chance. Registering for the last session and not scoring above 70% means that you have failed the course, and have no opportunity to retest this semester. You are strongly encouraged to practice the questions on COMPASS prior to your exam. Check your COMPASS Fin 300 site for sample questions and practice tests before you attend your test session. You are allowed to be absent from class one of the first three class meetings as a compensatory time for the time spent in the Assessment Exam if you wish.

Project set-up sessions will be in the evening, and are voluntary. No compensatory class time will be offered for these evening sessions. We will be covering a great amount of material in this short time so please use your time wisely. Topics from the text will be covered in order of the Table of Contents as closely as possible. For a complete listing of exam dates and project due dates see “Calendar of Exams and Due Dates” on my homepage, http://www.cba.uiuc.edu/broker/waspi.htm

Academic Integrity: The University statement on your obligation to maintain academic integrity is: If you engage in an act of academic dishonesty, you become liable to severe disciplinary action. Such acts include cheating; fabrication or invention of information or citation in an academic endeavor; helping or attempting to help others commit academic infractions; plagiarism; bribes, favors, or threats; academic interference; computer related infractions; unauthorized use of university resources; sale of class materials or notes; failure to comply with research regulations. Part 4 of the Student Code gives complete details of rules governing academic integrity for all students. You are responsible for knowing and abiding by these rules. Giving or receiving assistance on a graded work meant as individual effort will result in a score of zero for the work, along with other potential consequences. The Code is available on the web at: http://www.admin.uiuc.edu/policy/code/

Calendar

Day/date Class # Topic/activity Chapter Tues. 1-18 1 Efficient Markets, risk/return 1, 2 & 3 Assessment Exam window opens Wednesday, January 19 and runs through Thursday, January 26 Thur. 1-20 2 Portfolio Theory, CAPM 3 & 4 Tues. 1-25 3 Complete chapters 4, 5, & 6 4, 5, & 6 Thur. 1-27 4 Complete Equities, UISES Intro/Demo, Form UISES & Equity Groups 7, 8, & 9 Tues. 2-1 5 Complete work on equities UISES Trading Begins 1-9 Thur. 2-3 6 Midterm #1 6:30pm Evening Meeting, Stewardship Report Setup, 141 Wohlers Hall Tues. 2-8 7 Begin Money Markets 10 & 11 Thur. 2-10 8 Complete Money Markets, Introduce Debt Markets, Conventions 12 & 16 Tues. 2-15 9 Continue Debt Markets, Begin Term Structure 16 & 13 Thur. 2-17 10 Term Structure, Introduce Duration & Immunization 13 & 14 Tues. 2-22 11 Continue Duration, Immunization and complete Bond Basics 15 Equity Analysis Due IN CLASS Thur. 2-24 12 Mid-Term #2 10 – 16 Tues. 3-1 13 Government Bonds, including Municipals 17 – 18 6:30pm Evening Meeting, Stewardship Report Setup, 141 Wohlers Hall Thur. 3-3 14 Complete Governments, Start Corporate Bonds 18 – 19 1st Stew Due for Month ending 2-28-2011 Tues. 3-8 15 Corporate Bonds (continued) 19 Thur. 3-10 16 Finish Corporate Bonds, begin Investment Companies 19 – 20 Friday, March 11th is the last day to drop an Undergraduate semester class Tues. 3-15 17 Asset Backed Securities, review for Midterm #3 20 6:30pm Evening Meeting, Bond Project Setup, 100 Greg Hall Thur. 3-17 18 Midterm #3 17 – 20 Spring Break, No Class Monday, 3-21 thru Sunday, 3-27 Tues. 3-29 19 Group work on Bond Project, Begin Forwards & Futures 21 Thur. 3-31 20 Forwards, futures, trading, quotes, margin, uses 21 – 22 Tues. 4-5 21 Forwards, futures, trading, quotes, margin, uses 21 – 22 2nd Stew Due for month ending 3-31-2011 Thur. 4-7 22 Futures hedging, speculating, arbitrage 22 Optional Bond Project Draft Appointments Completed Tues. 4-12 23 Complete Futures, including Financial Futures 22 – 23 Thur. 4-14 24 Option features, Buying and selling, contract basics 24 Bond Analysis Due IN CLASS Tues. 4-19 25 Option payoffs, profits and strategy, international considerations 25 Thur. 4-21 26 Pricing Options 26 Tues. 4-26 27 Finish Options, Begin Swaps 26 – 27 Thur. 4-28 28 Swaps, interest rate agreements, currency and other issues 27 – 28 Tues. 5-3 29 Last Day of Class: Wrap up of business, complete our mission --- 3rd Stew Due for month ending 4-30-2010 Thursday, May 5 Reading Day

Final Exams are scheduled for the week of Friday, May-6 through Friday, May-13 (Found at: http://www.fms.uiuc.edu/FinalExams/index.asp?report=Final Exam Tools/Spring 2011 Non-Combined Guidelines.xml) Our Exam is scheduled for 1:30-4:30 PM, Friday, May 6 in the classroom