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Finance 3303 Investments Tuesdays, Fridays: 322 Hayden Hall, 1:35 PM To 3:15 PM Fall 2020 Syllabus
Finance 3303 Investments Tuesdays, Fridays: 322 Hayden Hall, 1:35 PM To 3:15 PM Fall 2020 Syllabus
Finance 3303 Investments Tuesdays, Fridays: 322 Hayden Hall, 1:35 PM To 3:15 PM Fall 2020 Syllabus
Investments
Tuesdays, Fridays: 322 Hayden Hall, 1:35 PM to 3:15 PM
Fall 2020 Syllabus
All classes will be by synchronous online zoom attendance. There will however be asynchronous
activities for students who will not attend synchronous classes.
Prerequisites
FINA 2201, 2202 or 2209. If your grade in these courses was C or worse, you are required to have a
conference with me to discuss your approach to this class. No exceptions.
Course Objective
The purpose of this course is to familiarize you with the concepts, tools, and terminology associated with
the investment environment. While the course contains advanced concepts necessary to the professional
investment manager, the material is vital to all investors and individuals interested in maximizing their
wealth. The format used for this course requires extensive preparation on your part. You are responsible
for reading the chapters before the lecture and for understanding problems I work in class. Most
problems are taken from the chapters. Success in this class depends on your ability to understand the
problems worked in class, and lecture notes, notes, notes.
Textbook (e-text) Bodie, Zvi, Alex Kane, and Alan Marcus, Investments, Eleventh edition, McGraw-Hill,
2017, ISBN-13: 9781260201550.
Recommended
The Wall Street Journal
Malkiel, Burton G., A Random Walk Down Wall Street: The Time-Tested Strategy for Successful
Investing, 8th edition, W.W. Norton & Company, New York, 2003
Calculators
In addition to the text, you should have, at minimum, a calculator with an exponential function for use
during class periods and on tests. Test questions require involved calculations and without a calculator
you will be at a disadvantage. While models with basic business functions are preferable, they are not
necessary for success in the course. Due to the structure of the exams programmable models that offer
advanced business functions will offer no advantage. Get to know your calculator!
I shall post all chapter assignments on Canvas. You may purchase McGraw-Hill Connect to obtain the e-
book. You may also find the textbook at a cheaper price on Amazon. How to register for FINA 3303,
Investments, fall 2020
https://connect.mheducation.com/class/m-muzere-fall-2020-tf-135---315-1
Class projects write-ups are listed on the schedule below. The projects are designed to expose you to
various investment strategies and to give you experience in conducting the research necessary to
implement them. The projects will be team efforts. Choose one team member to submit them. Teams will
be of your choosing and will be reported no later than our third class. Projects will require a heavy time
commitment - plan accordingly!
All reading for a class session should be completed prior to class. Learning in this class happens through
class discussion. Attendance and participation are therefore essential. If you must miss class for any
reason, please send me an e-mail prior to class alerting me to this fact. Further, simply showing up to class
is insufficient. Failure to participate in class will severely negatively impact your grade. Even if you find
yourself lost in the class discussion, ask questions—it is often the best form of participation.
The two exams will be comprehensive examinations of the material covered in the course. The first exam
will be about material covered in the first part of the course. The second exam will be about material
covered in the second part of the course. These exams are individual assignments, you are not to consult
with anyone about any aspect of the exams. More details will be provided in class. If you have any
questions about how the academic honesty policy (see below) applies to the exams, you should discuss
them with me.
Academic Honesty
It is not permissible to copy another person’s work without attribution, to copy old assignments, or to copy
another student’s work. Individual assignments and exams are strictly individual effort. Anyone caught
engaging in any form of academic dishonesty will receive a failing grade for the course and will be subject
to additional penalties by the University.
Bonus Points
You can add 2 percentage points to your final grade point average by submitting “discussions” of a news
event related to an investment topic each week which earns 20 points through week ten. The average of
these weekly points will count towards the bonus points. These discussions must be submitted through
Canvas. Each discussion is to be no longer than one page, single spaced, and 10pt. type minimum. They
must be in your words (or quotes) and the news must be timely. Corporate news items, earnings
announcements and market performance news are not acceptable. You should cite the source, but no
documentation is necessary.
Withdrawal policy
Withdrawals can be made until late in the semester. It is your responsibility to execute a withdrawal if
necessary. Please consult with me before doing so.
Academic Dishonesty
Academic dishonesty, including cheating on exams and plagiarism, will not be tolerated. Penalties for
such infractions can be found in the student handbook. Accordingly, I have the right to issue an ‘F’ on an
exam if I suspect cheating, and/or report the incident to OSCCR.
Course Content
The text is an excellent resource. We will not attempt to cover the entire text or listed chapters in detail. I
will be your guide through the following topics, and exams will weigh heavily on material covered in
class, so your regular attendance is advisable. The guide is approximate. I reserve the right to adjust the
order or the content as I deem necessary based on class progress. All chapters below are from the Bodie,
Kane, and Marcus text.
SESSION OUTLINE
The schedule, policies, procedures, and assignments in this course are subject to change in the event of
extenuating circumstances, by mutual agreement, and/or to ensure better student learning. L = Lecture, PS
= Problem Solving, R = Review, E = Examination
Week 4 Risk and Return and the Historical Record (Ch 5) Problems
Week 14 Review R, E
Exam 2
Group Projects
You are an investor with an investment horizon of one year and a certain degree of risk aversion. Your task is
to determine the efficient frontier in the case of two risky securities and one risk-free (T-bill) security and select
the optimal portfolio depending on your risk-aversion parameter. You need to do your work on a spreadsheet
(use one that you are comfortable with).
THE FOLLOWING STEPS WILL HELP YOU ACCOMPLISH THIS TASK:
1- Choose
• A well-diversified risky bond B represented by its E(RB) and STDB.
• A well-diversified stock fund S represented by its E(RS) and STDS.
• A T-bill with one-year maturity represented by RF.
2- Choose a correlation coefficient between B and S.
3- Make simulations on STD and E(R) of a "complete" portfolio (formed with B and S) by varying the weights
allocated on B and S.
4- Construct and graph the opportunity set (feasible set) for B and S from your simulations.
5- Compute the weights of the tangent portfolio (T).
6- Compute the STDT and E (RT) of the tangent portfolio (T).
7- Add the T-bill to your portfolio and redo step 3.
8- Repeat step 4 with the T-bill rate.
9- Choose different risk aversion parameters and determine your optimal weights in T and F and for the implied
optimal portfolio compute the E(R) and STD.
10- Write a two-page summary of your results
WB =
E ( RB ) − RF var( R S ) − E ( RS ) − RF cov( RS , RB )
E ( RB ) − RF var( RS ) + E ( RS ) − RF var( RB ) − ( E ( RB ) − RF + E ( RS ) − RF ) cov( RB , RS )
cov(Rs , RB ) = s B S , B
* For the stock fund:
WS = 1 - WB
* The last column of step 7: The Capital Market (Allocation) Line:
E ( RT ) − RF
E ( R c ) = RF + c
T
Choose one university from the top ten university endowments and a second university from the second
half of the top twenty university endowments
Where does a university get its endowment funds? What does the university use its endowment
funds for? Scholarships? Find out. How does the university invest its endowment funds? Find out.
Tell us the details. When you compare your two universities in these areas, are there any
similarities? Differences? What do we learn from this project? Tell us.
United States Institution Rank Beginning of Year 2017 End of Year 2017
In a bottom-up investment approach, the investor focuses on the analysis of individual stocks and de-
emphasizes the significance of macroeconomic cycles and market cycles.
In a bottom-up investment approach, the investor focuses the investor’s attention on a specific company
and its fundamentals, rather than in a top-down investment approach that looks at industry groups or on the
greater economy first.
The bottom-up approach assumes individual companies can do well even in an industry that is not
performing, at least on a relative basis.
Choose three companies (from these industries) from S & P 500 or Dow Jones Industrial Average; Build a
portfolio of 100 shares distributed among the three companies you have chosen. Record the purchase
prices and your total investment in dollars. This is the cost of your investment. Then follow your two
investments, one a portfolio of stocks of the three companies you have chosen and the other an investment
in the index you have chosen, over a period of two weeks. Make two readings per week with a spacing of
two days between the two recordings and record the price movements, recording your losses and gains.
Provide any economic insights that affect your portfolio and your index. This means that you must follow
the business and economic news closely. Make the weekly observations on the same days. For example, if
you choose Monday and Thursday or Tuesday and Friday as the days, then continue to make your
recordings every Monday and Thursday or every Tuesday and Friday. Please record the dates the
observations are made.