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UNIVERSITY OF ALBERTA School of Business
Department of Finance and Management Science
Finance 412 – Investment Principles Spring 2009
Instructor: Reza H. Chowdhury Office: BUS 2-32A
E-mail: [email protected]
Class hours: Tuesday and Thursday (9:00 a.m. – 11:50 a.m.) Class section: A1
Class room: BUS 1-10
Office hours: By appointment. Questions may also be submitted by e-mail subject to the following conditions:
I will answer e-mail questions within one business day. Please write FIN 412 in the subject line of your mail. I will not open messages without a subject. In addition, due to internet security considerations, I will only read e-mail originating from your University e-mail account. Any e- mail from non-University accounts (e.g. hotmail, yahoo) will not be read.
Class website URL: go to uLearn site at https://ulearn.ualberta.ca/webapps/login
Course Description:
The objective of this course is to provide the analytical tools, financial theory and empirical evidence necessary for making good investment decisions and for understanding the pricing of financial securities. The major topics are: fundamental principles of risk and return, diversification, asset allocation, international investment, capital asset pricing model, factor pricing model, efficient market hypothesis, performance measurement and evaluation.
Course Prerequisites:
The course’s prerequisite is FIN 301 and pre/co-requisite is MGTSC 352. This is a quantitative course and draws upon analytical tools and theories developed throughout the course. Students should be familiar with basic statistics and linear regression analysis in order to understand the material covered in the course. You should be able to use Excel and statistical programming for basic statistical and regression analyses. Some use of calculus and linear algebra may also be required.
Required Book
Textbook: Investments (6th Canadian Edition, McGraw-Hill Ryerson) by Bodie, Kane, Marcus, Perrakis, and Ryan (BKMPR).
You should solve the problems from the end of chapters that are relevant with class lectures.
Lecture notes, which outline each lecture, will be made available before each class via Blackboard. Other announcements will also be available on the Blackboard system. Make sure you check Blackboard on a regular basis. Your presence in class is not mandatory; however, missed classes are solely your responsibility. If you want to know what was covered in a class that you missed (including administrative announcements), or receive handouts from a class you missed, you will have to find a classmate who attended class and is willing to share her/his notes (not from me).
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During my lecture in class, I may include a few additional components which might not be available online or in Power Point slides. It is your responsibility to keep notes of those additional components discussed in class. All topics discussed in class are exam materials.
Grading
You grade is determined as follows:
Term paper 50%
Final Exam 50%
Your final course grade will be based on your absolute achievement and relative performance in the class.
Final Exam
Exam questions will be based on all materials covered until and including the last lecture before final exam. These include lectures, the relevant chapters in the textbook and the required readings. The final exam will be comprehensive and will cover entire course materials.
Important note: There are some chapter topics that will not be discussed in class. You can read them on your own. Materials in the textbook that are not covered in class will not be on the exam.
The Final exam date and time will be announced by the Registrar’s Office.
Exams are closed-book, but you can bring to the exam one 8 1/2 x 11 (letter size) sheet of paper with anything you want written on it (both sides). This sheet must be in your own handwriting and may not be mechanically altered (i.e. reduced by a photocopier). Also bring a calculator, but use of the text storage feature will be a violation of the Code of Student Behavior. Personal computers (notebooks, laptops etc) are not allowed in the final exam.
You MUST also bring your Student Identification Card (the ONE card) to final exam.
If you are unable to take the final exam you must apply to write a deferred exam. For more information on University procedures for applying for deferred final examinations consult the Undergraduate Office, or go to
http://www.bus.ualberta.ca/BCom/Current/PolicyProcedures/deferredexams.htm
Several of the end-of-chapter problems and questions in the textbook provide an excellent preparation for exams. What is important is that you understand the solutions to these problems and the concept of each topic.
Term paper
Late submission and E-mail or any type of electronic submission of your term paper will not be accepted.
If you fail to hand in your term paper, you will receive a grade of zero unless you provide appropriate documentation of the reason for failing to hand in the paper within 24 hours following the due date. With appropriate documentation, the weight of the term paper will be applied to the final examination. That is, if you do not hand in term paper and have a valid reason
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for not doing so, the weight of the term paper will be included in the final examination and therefore the total weight of the final exam for you will be 100%.
The due date (time) for the term paper is:
May 28, 2009 (By 3:00 p.m. in the mail box, assigned for the course, at 3rd floor of the Business Building)
Any submission after 3:00 p.m. on due date will not be graded. The box will be opened to collect all term papers at 3:00 p.m. (sharp).
Details about the term paper will be discussed in the class.
Warning: In preparing your term paper, you are encouraged to discuss the issues with other students. However, copying from others is considered academic dishonesty. See Code of Student Behavior below.
Code of Student Behavior (Rule for the Class)
The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behavior (online at www.ualberta.ca/secretariat/appeals.htm) and avoid any behavior which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University. (GFC 29 SEP 2003)
I will deal with cases of academic dishonesty in accordance with the Code of Student Behavior.
The Code of Student Behavior in 30.5.3 clearly states the followings:
30.5.3(1): “When a Student disturbs, disrupts, or otherwise interferes with classroom activities, the Instructor may immediately exclude the Student from the course for that particular Class meeting …”
30.5.3(2): “The Instructor shall talk to the Dean about the incident as soon as possible after the event occurred, and the Instructor shall inform the Dean about the incident, normally within 2 Working Days.”
I will strictly follow the above two clauses. Furthermore, I do not tolerate disruptive behavior in class. Examples of disruptive behavior in class include:
- Talking/laughing/teasing while the instructor is lecturing.
- Reading from books, newspapers, magazines, websites or any material not related to the lecture in course.
- Exchanging information (with other students) not related to the lecture in course.
In addition, while you may use a laptop computer where relevant during lectures, please refrain from using laptop computers or other hand-held devices for other tasks while in class. Activities such as emailing, web surfing and day trading are disruptive to the class and are deemed unacceptable. All cell phones and pagers should be muted during class.
For violating the above rules of the class, the concerned student will loose 10% from his/her total final grade.
4 Course Outline
Attached is an approximate outline of the course. The schedule needs to be somewhat flexible, given the unique needs of each class.
Topic 1: Introduction
Chapter 1: The Investment Environment Chapter 2: Financial Markets and Instruments Chapter 3: Trading on Securities Market
Chapter 4: Mutual Funds and Institutional Investors Topic 2: Portfolio Theory and Selection
Chapter 5: Return and Risk: Analyzing the historical record Chapter 6: Risk Aversion and Capital Allocation to Risky Assets Chapter 7: Optimal Risky Portfolios
Topic 3: Equilibrium in Capital Markets Chapter 8: Capital Asset Pricing Model
Chapter 9: Index Models and the Arbitrage Pricing Theory Topic 4: Market Efficiency and Behavioral Finance Chapter 10: Market Efficiency
Chapter 11: Behavioural Finance
Chapter 12: Empirical Evidence on Security Returns Topic 5: Equities
Chapter 16: Security Analysis
Chapter 17: Financial Statement Analysis Topic 6: Fixed Income Securities Chapter 13: Bond Prices and Yields
Chapter 14: The Term Structure of Interest Rates Chapter 15: Managing Bond Portfolio
Topic 7: Active Portfolio Management
Chapter 21: Active Management and Measurement Chapter 22: Portfolio Management Techniques Chapter 23: International Investing
Topic 8: Derivative Assets
Chapter 18: Options and Other Derivatives Markets Chapter 19: Option Valuation
Chapter 20: Futures and Forward Market
Relevant sections from each chapter will be announced for reading after the end of each class.
As we proceed through the course, I may add or drop topics, or alter the order in which we cover some of the topics.