FIN 320F FOUNDATIONS of FINANCE-Toprac

FIN 320f: Foundations of Finance, Fall 2008 Unique# 03110: MWF 10:00 – 11:00, UTC 2.102A Unique# 03115: MWF 11:00 – 12:00, UTC 2.102A Section 1. Objective Welcome to Foundations of Finance! The purpose of this course is to help you develop a basic understanding of Finance concepts and learn how to apply these concepts in both your work and personal lives. The course is divided into four discrete sections: (1) financial instruments and the markets in which they are traded, (2) financial reporting and analysis, (3) the time-value of money, and (4) the fundamentals of personal finance. Section 2. Contact Information Professor: Heidi Toprac Office: GSB 4.126C Office Hours: Mondays and Wednesdays 12:00noon to 1:30pm, and by appointment Email: [email protected] Feel free to drop in unannounced during office hours. Otherwise, email is my preferred method of communication. I keep all graded exams and uncollected homework in my office. To review exams, collect old homework or discuss grades, please contact me, rather than your TA. Bear in mind that UT’s privacy policy prohibits your TAs and I from discussing grade-related information via telephone or email. TA: To be announced Office: Office Hours: Email: TA: To be announced Office: Office Hours: Email: Your TAs are a wonderful source of help on your homework assignments, end-of-chapter problems, and so on. They can also provide excellent guidance regarding how to use Excel. Section 3. Prerequisites To remain registered for this course, you must have successfully completed ACC310f (or ACC311 and 312), as well as MIS302f or MIS311f (or STA309). Students lacking these prerequisites will be dropped from the course. FIN 320f may not be taken pass/fail if you are seeking the Business Foundations Certificate at graduation. For more information, refer to the Foundations website: www.mccombs.utexas.edu/udean/major/foundations/.

05af16af5f930e2b217cdb06dd3906e4.doc Page 1 of 7 Section 4. Tools & Materials Text: In an attempt to reduce both cost and bulk, we’ll be using a looseleaf, custom text, entitled Foundations of Finance - FIN 320F: Customized for The University of Texas at Austin, 3rd Edition. It contains several chapters from the 3rd edition of Principles of Finance, by Scott Besley and Eugene Brigham, plus chapters 9 and 13 from the 2nd edition of the same book. You might want to insert it in a 3-ring-notebook. You can obtain it both new and used from the Co-op, or used from Beat the Bookstore (located in Dobie Mall). Another option is to buy a new or used copy of the 3rd edition of the actual hardcover book from Amazon.com or any other bookseller, and borrow chapters 9 and 13 of the 2nd edition from a classmate. Handouts: Periodically, articles from the financial press will be distributed during class, in hardcopy form only. These articles are intended to augment your learning experience, and help ensure that the course materials are current and relevant. I will print them on three-hole-punched paper to facilitate using a 3-ring-notebook. I will place extras in the rack that’s hanging on the wall right outside my office door. Calculator: Please bring a calculator to class each day. Although any calculator that can handle exponents and square roots will suffice, a calculator with financial functions (eg. INT, PV, PMT, IRR) can be very helpful—as long as you know how to use it. You may not use a cell phone as a calculator during exams. Blackboard: Lecture slides, problem sets distributed in class (and their solutions), homework assignments (and their solutions), solutions to the end-of-chapter problems, and other great stuff will be posted on Blackboard. In addition, please check the “Announcements” on Blackboard each week for any changes to the syllabus, updates on exam schedules, and so on. E-gradebook:All of your grades—homework, exam, extra credit—will be posted on e-gradebook. With a class of this size, Blackboard’s gradebook is just too slow. E-gradebook is a much speedier and far more efficient way for you to see your scores. Email: From time to time, I may need to email you. The communications policy in the General Information Catalog states: "Electronic mail (e-mail), like postal mail, is a mechanism for official University communication to students. The University will exercise the right to send e-mail communications to all students, and the University will expect that e-mail communications will be received and read in a timely manner." Enough said. Software: All lecture slides will be prepared using PowerPoint. You must use Word to prepare Homework 1 and 2. You must use Excel to prepare Homework 3 and 4. As mentioned earlier, if you have any concerns about your proficiency with Excel, please ask one of your TAs for help. Section 5. Grades Your final grade in the course will depend on the homework and exam scores recorded in e- gradebook as of 5:00pm on the last class day of the semester. If you suspect an error in grading a particular exam or homework assignment, contact me within 1 week of the time the grade was posted (or should have been posted). Given the size of this class, if you wait more than 1 week to address a grading problem, I cannot promise that it will be corrected before I submit your final

05af16af5f930e2b217cdb06dd3906e4.doc Page 2 of 7 grade. Grade-related issues that are not resolved within two weeks of the posting date will be subject to a 10% penalty. After 2 weeks, a 30% penalty will apply; after 3 weeks, a 50% penalty will apply. After four weeks, the disputed item is no longer eligible for credit. Final grades will be determined as follows:  The average of your four homework percentage scores will be multiplied by 40%.  The average of your four highest exam percentage scores will be multiplied by 60%.  The sum of these two scores will determine your final grade. Final grades are standards based, rather than norms based, so there is no need for an artificial curve. If you demonstrate mastery of at least 90% of the course material, as calculated above, you will earn an “A”. An overall course score of 80-89% will earn a “B”; a score of 70-79% will earn a “C”; a score of 60-69% will earn a “D”. A “D” is the lowest passing grade.

Section 6. Examinations The exams in this course are designed to measure how well you have synthesized the concepts learned in class. There will be four in-class exams—one for each section of the course. Each will be non-comprehensive; that is, each will cover only the material related to that section. In addition, there will be an optional final exam during the final exam period. The final exam will be comprehensive; that is, it will cover material from the entire semester. Each exam will have 25 multiple-choice questions. Everything in your text and everything distributed and discussed in class (including handouts, films, and presentations by guest speakers) is subject to examination. Bring your pencils, calculator and picture identification to each exam. There will be a formula sheet attached to each exam, so you need not bring your own. You may not use a cell phone, i-pod, or any other electronic devices during an exam. You must take your exams with the section for which you are registered. Failure to do so will result in an automatic 10% penalty being deducted from your exam score. You must take four exams to pass the course. If you miss an exam—because of illness, an accident, family issues, a funeral, a job interview, a sporting event, etc.—the final exam will serve as your make-up exam. The comprehensive final exam is the one and only make-up exam for the entire semester. The lowest of your five exam scores will be dropped when computing your final grade. At the end of the semester, if you are satisfied with your first four exam scores and your homework scores, you can skip the final exam. Important note: The final exam will be a uniform final; that is, students from both sections will be taking the final exam together. These uniform finals are not scheduled by the Registrar until very late in the semester—usually three weeks before the last class day. The Registrar will use the letter “u” to indicate that it is a uniform final. As soon as the Registrar schedules our uniform final, I will announce the time and date on Blackboard and in class. The Registrar will also report another exam time, and will use the letter “m” to indicate that it is a make-up final. The make-up is only for students who have another final exam scheduled at the same time as our uniform final exam. The make-up final is not for students who have already purchased plane tickets, scheduled a job interview, or planned any other sort of event that conflicts with the uniform final exam. I cannot make any exceptions; please don’t ask me.

05af16af5f930e2b217cdb06dd3906e4.doc Page 3 of 7 Section 7. Homework The homework assignments in this class are designed to enable you to apply the concepts you’ve learned in class to authentic, Finance-related events, and then reflect on how these concepts affect you personally. There will be four homework assignments—one for each section of the course. Each assignment is worth ten percent of your final grade. Since homework is such an important part of your grade, we don’t want it to be mistakenly counted late, or, worse yet, lost. Luckily, we can use Blackboard as both timekeeper and backup plan. Thus, to obtain credit for your homework, you must submit both an electronic copy and an identical printed copy, as follows: (1) Submit an electronic copy of your completed assignment (in Word or Excel, depending on the assignment) to Blackboard prior to the start of class on the day the assignment is due. (2) Print the file(s) that you submitted to Blackboard and turn in the printed copy at the start of class on the day the assignment is due. Since the paper copy is the printout of a Word or Excel file, it follows that no handwritten homework will be accepted. Ensure that your name, UTEID and unique number are recorded on each page of your homework. Multiple pages must be stapled together. Your TAs and I can’t grade your homework unless we receive a hardcopy (since we can’t use UT resources to print it for you). If you can’t make it to class, submit your paper copy to the Finance department office, CBA 6.222. If there are any disputes or discrepancies regarding homework submission, the time stamp and data on the electronic copy on Blackboard will prevail. You will have at least one week to prepare and submit each homework assignment. Your homework scores will be posted in e-gradebook, and your graded copy will be returned to you during class, on the dates indicated on the syllabus. Thereafter, the solutions will be posted on Blackboard. Homework will be considered on-time if it is submitted within the first 15 minutes of class on the due date. Homework is late if it is submitted after the first 15 minutes of class on the due date. Four points (out of 10 possible points) will be deducted from late homework. Thus, the highest score that can be earned by late homework is a “D.” No homework will be accepted after 5:00pm on the due date. Please remember that even if you submit an assignment on Blackboard (whether on-time or late), we still need a printed copy in order to grade it. Submit late paper copies to the Finance department office, CBA 6.222. Because all homework solutions will be posted online (to enable students to check their work and prepare for exams), there will be no opportunities to “make up” late homework. Let me repeat that: There are no make-up opportunities for missed homework assignments. From time to time, extra credit opportunities may be announced during class. These opportunities will be available only to those students who attend class on the day(s) of the announcement(s).

Section 8. Academic Integrity The McCombs School of Business has no tolerance for acts of scholastic dishonesty. If you copy an author’s or website’s words into your homework without appropriate references, it will be considered plagiarism. Further, although it is perfectly acceptable to work in groups, you must create and submit your own individual Word and Excel files. Work that is copied will earn a score of zero. Further, the student(s) involved will be subject to other penalties. By teaching this course, I have agreed to observe all the faculty responsibilities described in the policy on scholastic dishonesty. By enrolling in this class, you have agreed to observe all the

05af16af5f930e2b217cdb06dd3906e4.doc Page 4 of 7 student responsibilities described in the policy on scholastic dishonesty. Students who violate University rules on scholastic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course and/or dismissal from the University. Refer to Student Judicial Services at http://deanofstudents.utexas.edu/sjs/ or the General Information Catalog to access the official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic dishonesty. Section 9. Students with Disabilities The University of Texas at Austin provides upon request appropriate academic accommodations for qualified students with disabilities. For more information, contact the Office of the Dean of Students at 471-6259, 471-4641 TTY. Section 10. Class Schedule Any changes to this schedule will be communicated during class and announced on Blackboard. Items in italics are available on Blackboard.

Day Date Class Topic Readings & Problems Wed Aug 27 Introduction; Syllabus Read the Syllabus Fri Aug 29 Introduction to Section I; Read Ch 2; Do Questions 2-1 & 2-2; Self-Test Chapter 2 Part 1: Financial Problem ST-1 (a-c, e, g-m, o-p & r only); Instruments Problem 2-2; Exam-Type Problem 2-7 (a & b) Mon Sep 1 Labor Day: No Class Wed Sep 3 Chapter 2 Part 2: Financial Do Ch 2 Integrative Problem 2-9 Instruments Fri Sep 5 Chapter 3: Financial Markets Read Ch 3; Do Questions 3-1, 3-4, 3-6, 3-7, 3- 8 3-9 & 3-10; Self-Test Problem ST-1 (skip f); Problems 3-4, 3-5; Integrative Problem 3-9 (skip g) Mon Sep 8 Chapter 4 Part 1: Financial Read Ch 4, pgs 87-102; Do Questions 4-1, 4- Market Participants 2, 4-3, 4-5; Self-Test Problem ST-1 (a-d only) Hmwk 1 available on Blackboard Wed Sep 10 Film: The Stock Exchange Fri Sep 12 Chapter 4 Part 2: Mutual Funds Note: 12th class day Mon Sep 15 Chapter 4 Part 3: The Federal Read Ch 4, pgs 106-109; Do Question 4-9, Reserve Self-Test Problem ST-1 (h & i only), ST-2; Homework 1 Due Integrative Problem 4-10 Wed Sep 17 Chapter 5 Part 1: Financial Read Ch 5, pgs 120-124; Do Question 5-1; Returns Problem 5-1; Exam-Type Problems 5-5 & 5-6 Problem Set 1: Chipotle Fri Sep 19 Chapter 5 Part 2: Interest Rates Read Ch 5, pgs 127-132 and 139-142; Do Questions 5-3 & 5-6; Self Test Problem ST-1 (c-g) & ST-3; Integrative Problem 5-10 (a-d) Mon Sep 22 Review for Exam 1 Homework 1 Returned Sample Exam Wed Sep 24 Exam 1 Note: Last day to drop a class

05af16af5f930e2b217cdb06dd3906e4.doc Page 5 of 7 Day Date Class Topic Readings & Problems Fri Sep 26 Introduction to Section II; Read Ch 7 pgs 185-195; Do Questions 7-1, 7- Ch 7 Part 1: The Balance Sheet 2, 7-3 & 7-9; Self-Test Problem ST-1 (a-d Problem Set 1: The Balance Sheet only); Exam-Type Problem 7-12 Mon Sep 29 Ch 7 Part 2: The Income Stmt Problem Set 2: The Income Stmt Wed Oct 1 Chapter 8: Forecasting Read Ch 8 pgs 228-238; Do Questions 8-1 & Problem Set 3: Forecasting 8-9; Self-Test Problem ST-1 (a-d only) Hmwk 2 available on Blackboard Fri Oct 3 Chapter 7 Part 3: Ratio Analysis Read Ch 7 pgs 196-214, plus Ch 15 pgs 576- 579; Do Questions 7-4, 7-5, 7-6, 7-7, 7-8 & 7- 10; Self-Test Problem ST-1 (e-l); Problems 7- 1, 7-2, 7-5, Integrative Problem 7-14 Mon Oct 6 Chapter 7 Part 4: More Analysis Problem Set 4: Analysis Wed Oct 8 Chapter 6 Part 1: Business Read Ch 6 pgs 148-168; Do Questions 6-1, 6- Organization 3, 6-5, 6-6, 6-7 & 6-8; Self-Test Problem ST- Homework 2 Due 1 (a-l only) Fri Oct 10 Chapter 6 Part 2: Taxes Read Ch 6 pgs 169-178; Do Questions 6-10, Problem Set 5: Taxes 6-11, 6-12 & 6-13; Self-Test Problems ST-1 (m-q only) & ST-2; Problems 6-1, 6-2 & 6-4; Exam-Type Problems 6-7, 6-8 & 6-10; Integrative Problems 6-11 & 6-12 Mon Oct 13 Review for Exam 2 Homework 2 Returned Sample Exam Wed Oct 15 Exam 2 Fri Oct 17 Introduction to Section III; Read Ch 9 pgs 283-298; Do Self-Test Chapter 9 Part 1: Lump Sums Problem ST-2; Problems 9-1, 9-2, 9-3, 9-8 & 9-9; Exam-Type Problem 9-18 Mon Oct 20 Problem Set 1: Lump Sums Wed Oct 22 Chapter 9 Part 2: Annuities Read Ch 9 pgs 298-324; Do Self-Test Probs ST-1, ST-3 & ST-4 (skip f-h); Problems 9-4, 9-5, 9-6, 9-7, 9-10, 9-11 & 9-12; Exam-Type Problems 9-19, 9-22, 9-24, 9-25 & 9-27; Integrative Problem 9-31 (skip l-o) Fri Oct 24 Problem Set 2: Annuities Mon Oct 27 Problem Set 3: Amortization Tables (and tips on using Excel) Hmwk 3 available on Blackboard Wed Oct 29 Chapter 13 Part 1: Capital Read Ch 13 pgs 473-488; Do Question 13-5 Budgeting & 13-8; Self Test Problem ST-1 (a-h only) Fri Oct 31 Problem Set 4: Capital Projects

Mon Nov 3 Problem Set 5: Lease vs. Buy Homework 3 Due

05af16af5f930e2b217cdb06dd3906e4.doc Page 6 of 7 Day Date Class Topic Readings & Problems Wed Nov 5 Chapter 13 Part 2: Other Read Ch 13 pgs 488-501; Do Question 13-2 ; Evaluation Methods Self-Test Problems ST-1 (i, k, l, n, o only) & Problem Set 6: NPV vs Payback ST-2 (a-c only); Problem 13-1 (a-b only); Exam-Type Problems 13-10 & 13-12; Integrative Problem 13-19 (skip i-k) Fri Nov 7 Review for Exam 3 Return Homework 3 Sample Exam Mon Nov 10 Exam 3 Wed Nov 12 Introduction to Section IV; Step 1: Establish Objectives Fri Nov 14 Step 2: Deal with risk Mon Nov 17 Steps 3 & 4: Select investments Hmwk 4 available on Blackboard Wed Nov 19 Step 5: Take the plunge Read Ch 16 pgs 617-629; Do Questions 16-3, 16-4 & 16-5; Self-Test Problem ST-1 (a-h only); Integrative Problem 16-15 (a-f only) Fri Nov 21 Problem Set 1: Make choices Mon Nov 24 Step 6: Monitor performance Read Ch 16 pgs 630-648; Do Question 16-2, Homework 4 Due 16-6, 16-7, 16-8, 16-9, 16-12, 16-13 & 16-14; Self-Test Problems ST-1 (i, j, k and m) & ST-3; Problems 16-1, 16-2, 16-3, 16-4, 16-5 & 16-8; Exam-Type Problems 16-13, & 16- 14; Integrative Problem 16-15 (g, h, i only) Wed Nov 26 Thanksgiving: No Class Fri Nov 28 Thanksgiving: No Class Mon Dec 1 Problem Set 2: Monitor Wed Dec 3 Review for Exam 4 Homework 4 Returned Sample Exam Fri Dec 5 Exam 4 Note: Last class day (Whoo-hoo!!!)

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