UNIVERSITY OF ALBERTA
School of Business
Finance 488 (Personal Finance) Winter, 2010 Instructor: Rick Hinton
Classroom: BUS 2-05, Mondays, 18:30 – 21:30 Office Hours: BUS 2-33 Mondays 17:15 – 18:15 E-mail: [email protected]
Text: J. Madura and H.S. Gill. Personal Finance Canadian Edition, Toronto: Pearson Addison-Wesley.
You might wish to read the assigned material before class so that you know what to expect when you come to the lectures, but that is not necessary. Finance 301 is the pre- requisite for this course, although the instructor may waive that upon request. It also is assumed that you have completed a course in financial accounting.
Calculator: A financial calculator is recommended for this course, and the exams will be set up assuming that you will be using one. The instructor uses an Texas Instruments BA II+, and will be referring to its functions during the course as the class norm. You will find the course easier if you use that calculator.
Goals of this Course:
1. To expand your understanding of personal financial concepts, most of which will be useful to you in managing your personal financial affairs.
2. To increase your financial awareness and to understand financial events and legislative changes that that may be reported in the media, and which might affect your financial well being.
Upon successful completion of this course, you should be able to set up a financial plan suitable for your goals in life and thus avoid some of the financial slings and arrows of outrageous fortune.
Topic Outline
It is only a small exaggeration to say that during our working lives, we try to convert our human capital into non-human capital, that is, into a retirement nest-egg. You do this initially by providing your labour for a fee (salary), later substituting your investment brain-power, and finally letting your accumulated assets provide your income.
Throughout this process, you also protect your assets and earning power through such techniques as insurance and risk management. There is an old saying: “If you can’t afford the insurance premium, you can’t afford to be without the insurance”. But how much is too much? You must also consider various forms of financial risk that relate to your stage of the life cycle. If you are 25 years old with a long career ahead of you, but few financial assets and babies joining your family, you will have different financial
circumstances and planning criteria than the 45-year old with a grown family and an investment portfolio.
This course is not designed for the financial planning professional, although it is based on financial planning principles. It is not designed to give insights into stock market investing, although stocks and other financial assets in a portfolio will be discussed. It is not designed to help you prepare your income tax return, although personal income taxes will be discussed. The target market is the person who seeks insight into his or her own financial planning needs or someone who might be interested in later taking courses leading to certification in the financial planning professional field.
Grading:
The aggregate score for each student will be based on a weighted average of scores obtained on two tests and two related assignments.
Weighting Date
Test 1 25% Feb 8
Initial assignment 10% Mar 15
Test 2 40% Mar 29
Final assignment 25% Apr 5
The weighting of a missed first test will automatically be added to that of the second test. Calculators are permitted and, in fact, the tests are prepared with the assumption that you will be using a financial calculator. Proficiency in the use of a financial
calculator is a requirement of this course.
Test #2
The second test covers the entire course, but emphasizes the material presented after the mid-term. All exams may consist of multiple choice questions and short
answer/problem type questions.
ASSIGNMENTS
There will be two assignments. You are encouraged to work on the assignments in groups of up to four people. Only one assignment should be submitted for each group.
Each member of the group will receive the same grade on the assignment. On the cover page be sure to list the names of all the people in your group. Type the assignments double spaced. Assignments are to be deposited in the box outside the General Office on the third floor of the business building by 3:00 on the due date.
Late assignments will be penalized 25% for the first 24 hours, an additional 25% for the next 24 hours and 100% penalty after 48 hours late. If you have difficulty with the course material, see me as soon as possible.
As in any university class, attendance is not mandatory but it is highly recommended. It is up to you to keep lecture notes. Anything that we discuss in class is considered fair to be on an exam, and I shall be adding material that is not in the text. It will be to your benefit to ask questions in class and ask me to clarify any concepts that are not clear to you.
Course Schedule (subject to change by the instructor)
Date Topic Readings
Jan 11 Overview of a Financial Plan;
Planning with Personal Financial Statements
Ch. 1 Ch. 2 Jan 18 Using Tax Concepts for Planning
Banking Services and Managing Your Money
Ch. 3 Ch. 4
Jan 25 Behavioural Finance
Assessing, Managing and Securing Your Credit; Bankruptcy
Your Research Ch. 5
Feb 1 Personal Loans
Purchasing and Financing a Home
Ch. 6 Ch. 7
Feb 8 Test #1 (Ch. 1-7)
Feb 15 Family Day. No Class
Feb 22 Auto and Homeowner’s Insurance Ch. 8
Mar 1 Health Insurance; Life Insurance Ch. 9 & 10
Mar 8 Retirement Planning; Estate Planning
Ch. 15 & 16 Mar 15 Investing Fundamentals and Investing in
Mutual Funds, Stocks and Bonds Initial Assignment due
Ch. 11, 12, 13
& 14
Mar 22 Integrating the Components
of a Financial Plan
Ch. 17
Mar 29 Test #2 (Ch 1-17)
Apr 5 Final assignment due
