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University of Southern Indiana
Department of Accounting and Finance Course Syllabus
Finance 433.NO1 – Principles of Investments (3 Credits, Online Course)
Fall 2014
This syllabus is a contract between students who enroll in this class and the instructor.
It includes the rules, requirements, the instructor’s expectations of performance and
behavior during the course. In return, the instructor will honor the specifications of
this course as outlined in this syllabus and will assign grades accordingly. However,
the instructor reserves the right to amend the syllabus based on course needs. When
such changes are made, students will be informed by email.
I. Instructor Information
Instructor: Dr. Manfen W. Chen Office: BE3003
Telephone: 812-461-5333 Email: [email protected]
On-campus Office Hours:
11:00a.m. - noon on Mondays, Wednesday, and Fridays
Other hours: by appointments.
On-line Live Meeting: Breeze Live Meeting may be set up upon request.
Website: http://business.usi.edu/mwchen/
If you are having trouble logging in to Blackboard, watch this video.
II. Prerequisites: FIN305
It is the responsibility of students to insure that all course pre-requisite requirements
are met prior to enrolling in this course. Students are subject to administrative
removal from the course if, at any time, it is determined that course pre-requisites
have not been met.
III. Course Description
This course is to provide an overall understanding of investment analysis in
common stock, bonds, and other classes of financial assets. The discussion of
financial statements within the context of investing and the sources of information
available to investors will also be covered.
IV. COB Skill Development
This course will help students to develop skills of critical thinking.
V. Course Objectives
This course provides an introduction to the principles of investments including the
role of different financial securities and markets, the essence of efficient
diversification and asset allocation, bond and equity valuation, stock price behavior
and market efficiency, and the basics of derivatives and option strategies. The
objectives of the course are twofold: help students to obtain fundamental knowledge
of investment and to develop skills of critical thinking.
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Objective 1: Knowledge of the Principles of Investments and Learning Assessment
Upon completion of this course, students are able to articulate, explain or identify the
following major topics. The learning outcome of the knowledge part of this course is
assessed through the multiple choice questions and short answer/essay questions of
three noncumulative exams.
(1) Compare the mechanics and investment implications of buying on margin
and short selling.
(2) Contrast open-end mutual funds with closed-end funds, exchange-traded
funds, and hedge funds.
(3) Demonstrate how covariance and correlation affect the power of
diversification to reduce portfolio risk.
(4) Construct efficient portfolios.
(5) Describe the risk-return tradeoff in portfolio management.
(6) Discuss the valuation of financial securities (stocks and bonds).
(7) Describe the usage of duration of bonds and its impact to the bond prices
given a change of market interest rates.
(8) Explain how options work and describe their characteristics.
(9) Elaborate the motivation and structure of some popular option strategies:
protective puts, covered calls, straddle, and spreads.
Objective 2: Skills of Critical Thinking and Learning Assessment
The skill of critical thinking is developed by means of portfolio assignment.
Students are required to conduct a fundamental analysis on a company and then
form an investment strategy. Furthermore, students are required to trade in
different securities, such as mutual funds, bonds, and futures, and engage in
options. Upon completion of this assignment, students are able to:
(1) Analyze the company’s financial statements using ratio analysis.
(2) Apply the Dividend Discount Model, the Residual Income Model, the Price
Ratio Analysis (P/E, P/CF, and P/S), and the Enterprise Ratio to estimate its
stock price and compare the estimates to its market price to form an
investment strategy.
(3) Apply different investment strategies to hedge long or short positions.
The learning outcome of the skill of critical thinking is assessed using the Critical
Thinking Rubric with three traits.
Trait 1: Information
a. Find relevant information to conduct ratio analysis.
b. Find relevant information to estimate discount rate and growth rate.
c. Find relevant information to estimate market risk premium.
d. Report the comparison of selected stock to their peers and to their
industry averages.
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Trait 2: Viewpoints
a. Incorporate viewpoints from multiple stakeholders, such as security
analysts, economists, fund managers, investors, and insiders/managers.
Trait 3: Conclusion
a. Based on estimates of stock price and comparison of selected stock
and its peers, discuss the investment strategy employed.
b. Conclude the effectiveness of the employed investment strategies and
lessons learned.
Critical Thinking
Trait
Critical Thinking Rubric Evaluation for the Written Report of Portfolio Simulation
Does Not Meet Expectations
Meets Expectations
Exceeds Expectations
Information
Uses no/very limited information
Identifies some relevant information
Uses a range of carefully evaluated relevant
information
Viewpoints Does not incorporate
multiple viewpoints/stakeholders
Incorporates some relevant viewpoints/stakeholders
Incorporates a careful evaluation of relevant
viewpoints/stakeholders
Conclusion
Conclusion is not clear or does not logically follow
from prior analysis
Conclusion is clear and generally follows from prior
analysis
Conclusion clearly and logically follows from prior
analysis
VI. Course Requirements:
1. “Fundamentals of Investments: Valuation and Management” by Jordan and
Miller (7th
edition), McGraw-Hill/Irwin Publishers. ISBN: 0078115663.
2. Daily reading of the Wall Street Journal is recommended. Students are also
urged to read the daily financial news offered by various websites.
3. A business financial calculator is required. BA II PLUS (or BA II PLUS™
PROFESSIONAL) from Texas Instruments and HP 10B are two options.
Instructions for using BAII PLUS are posted on Blackboard. Click on Notes &
Assignments section and then click on Chapter 1 folder. For further assistance
in using BAII PLUS™ PROFESSIONAL, please visit
http://www.atomiclearning.com/ti_ba2
4. Technology Requirement and Internet Access: This course is delivered entirely
via Internet using USI’s Blackboard system. Thus, all materials are accessible
online only by logging in https://blackboard.usi.edu/webapps/login/. Students
must have skills in computer and Internet use, as well as familiarity with the
Blackboard program. Visit the Blackboard Help site,
http://help.blackboard.com/student/index.htm, for more information.
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System requirements, copied from USI website at
https://www.usi.edu/distance/students/current/requirements, are listed below:
Item Details Where to get it?
Computer
Students taking one or more Distance Learning
courses should have dedicated access to a
computer using a modern operating system such
as Windows 7 or Mac OS X. Students should
make sure to have access to a back-up computer
from work, friend, or relative’s computer in case
of equipment failure.
DELL http://www.dell.com
Apple http://www.apple.com
High Speed
Internet
A high-speed Internet connection (e.g. DSL or
Cable) is required for distance learning students.
Wireless connection provides convenient web
access, but it sometimes can be unstable and
drop in signal quality. Check your Internet
Connection Speed.
WOW (Cable)
http://www.wowway.com/our-
products/internet
AT&T (DSL)
http://www.att.com/shop/internet.ht
ml
Web
Browsers
A minimum of two web browsers (e.g. Firefox,
Google Chrome, and Safari) is required for
Distance Learning Students. Please note
Internet Explorer is not compatible with
Blackboard.
Firefox http://www.firefox.com
Chrome http://www.google.com/chr
ome
Safari
(Mac)http://www.apple.com/safari
Updated
JAVA
Java is a programming language and computing
platform first released by Sun Microsystems in
1995. There are lots of applications and
websites that won't work unless you have Java
installed.
Download JAVA free
at http://www.java.com
Adobe
Acrobat
Reader
Adobe Acrobat Reader enables users to view
and print PDF files but has negligible PDF
creation capabilities. Most research articles and
online journals are saved in PDF format.
Download Adobe Acrobat Reader
free athttp://get.adobe.com/reader
Anti-virus
Software
Anti-virus software is a computer program that
detects, prevents, and takes action to disarm or
remove malicious software programs, such as
viruses. To help prevent the most current
viruses, you must update your antivirus software
regularly. You can set up most types of antivirus
software to update automatically. For on-
demand protection, the Microsoft Safety
Scanner allows you to scan your computer for
viruses and other malicious software for free.
Norton 360 2013 for PC
McAfee Dual Protection for
Mac/Win
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VII. Course Organization
Please note that this course is an online structured course and not classroom based;
therefore, students must be willing to be active learners. Students who take online
courses tend to require more time and effort to master course materials than in
traditionally taught classes, so students are encouraged to take advantage of the
instructor’s office hours and online discussions. Textbook and narrated PowerPoint
presentations and videos are virtual lectures, so notes should be recorded from those
sources.
Modules: All topics are organized in modules. There are eleven modules that may
be found under COURSE DOCUMENTS on Blackboard, one module for each
chapter, except two modules for chapter 15 because of the complexity of the
material. There is one folder for each module, and each module contains several
learning units: a study procedure, PowerPoint slides, homework assignments,
answers to selected questions in the sections of the Concept Questions and
Questions and Problems from the textbook, and/or a quiz for review. It depends on
the complexity of the materials, some modules may contain links to VoiceThread to
listen to recording which is designed to help understand materials presented in
slides. Some modules may contain links to videos stored at www.screencast.com.
These videos help explain the process of solving certain problems or exercises and
show how to create an efficient portfolio using Excel.
To access a quiz, click on COURSE DOCUMENTS, then click on the folder for a
particular chapter, you will then see all learning units described in the previous
paragraph. The quiz for that chapter is the last item saved in that folder. However,
each quiz is only available and visible during the time period specified in the
document named Fall 2014 Quiz and Exam Schedule posted on Blackboard. Some
quizzes are multiple choice questions. Some are problem solving questions and/or
graphing questions. You need to download a copy of each quiz and once you finish
it, you will upload it to Blackboard for grading. A link for submitting a quiz is also
provided at the same area where a quiz is posted. You can write your answers on
the quiz sheet and then scan it before uploading.
Study Procedure: It provides a proposed study sequence and a list of homework
questions from the textbook for that chapter.
PowerPoint slides, VoiceThread Presentation Recording, Camtasia Video Clip
Recording: Each module/chapter contains multiple sets of PowerPoint slides
separated by topics. Some has only few slides; some may have 20 or more slides.
Topics are explained on slides as details as possible but sometimes, it is impossible
to type up all explanations. Thus, I have created VoiceThreads to record
explanations to slides that appear to be more difficult to understand and then
provide links for students to view and listen. I have also created video clips using
Camtasia software to record computer screen and explanations. Each module has
PowerPoint slides but may have or may not have VoiceThread and video clips.
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For each module, students follow the process as suggested below and repeat as
many times as needed:
QUIZZES: Not every module has a quiz. Some modules have more than one quiz.
Quizzes may have multiple choice questions, fill-in blanks, and problem solving
questions. You may be asked to draw contingency graphs or use Excel to solve
problems. Students should follow the timeline set up on page 12 of the syllabus for
each learning unit. The quizzes are available online only during a two-day time
limit (see Fall 2014 Quiz and Exam Schedule posted on Blackboard). Students
should download a copy of the quiz and upload your answers before the due date
and time. You may need to scan your answers before uploading. Once the quiz is
due, the submission link will disappear.
•Read suggested pages from the Study Procedure.
Preview
•View and listen PowerPoint slides, VoiceThread, Video clips.
Virtual Lecture
•Go over Chapter Review and Self-test Problems and Concept questions as suggested in Study Procedure.
Review
•Work on homework assignment: Test Your Investment Quotient, Questions and Problems.
•If not successful, repeat step 1 and 2.
Homework
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VIII. Navigation of Course Contents and Communications
The following components are used to navigate the course and to communicate with
the instructor.
AREA Description
Announcements Announcements post timely information regarding
the course. Regular checks on announcements are
mandatory.
Technical Contact Info It displays contact information of Blackboard Support
and Distance Education Learning Center.
Course Documents There is one folder for each module/chapter, and
each module contains several learning units: a study
procedure, narrated PowerPoint slides, videos,
answers to selected questions in the sections of the
Concept Questions as well as Questions and
Problems from the textbook, and a quiz for review.
Communication The communication area allows students to send and
receive messages, open Discussion Boards, enter the
Virtual Classroom, join a Chat forum, and view the
roster. Students are encouraged to stimulate
discussion, but any posting of assignment answers
will be penalized by the instructor.
Course Tools Tools used in the course allow students to view
announcements, to edit the Calendar, to create/edit a
Home Page, to view Grades, and to edit the personal
information.
Course Map Navigate the course through a collapsible tree
directory
Although course materials are posted and delivered online, students are expected to
communicate with the instructor and with other classmates throughout the semester.
1. A Text-based Chat: The Chat allows students to interact with each other.
To join a chat, click Communication, select Collaboration Tools, and then
click Join at any Chat session.
2. Discussion Board: Any student may initiate a Thread (a conversation in a
forum) and other students may post their responses or view all responses
to the topic. This is particularly useful for students to help each other
understand the topic. The instructor will intervene if the discussion needs
guidance.
3. Students are encouraged to contact the instructor via email
([email protected]), phone (812-461-5333), or in person at the instructor’s
office (BE3003). E-mail will be answered within 48 hours on work
days.
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IX. Evaluation Procedure and Grading Policy
1. There will be three noncumulative exams, each 100 points. Even though none of
the exams are cumulative, concepts developed in earlier chapters could be
employed in later chapters. The average of the three exams will count for 80%
of your final grade.
Exam I – Thursday, Oct. 2 (Location: TBA)
Exam II – Monday, Nov. 3 (Location: TBA) Final Exam – choose either day to take the final
Thursday, Dec 11
or Friday, Dec. 12
(Location: TBA)
You are allowed to have 2 hours to finish each exam. On each exam day, I
will proctor the exam from 4 p.m. to 8 p.m. You can come in any time
after 4 p.m. but not later than 6 p.m. in order to take the exam. I will leave
the classroom at 8 p.m.
You have to take each exam on the date that is scheduled. If you are not in
Evansville, you can contact the Department of Distance Learning at USI to get
an off-campus proctoring service. The exam must be taken any time on the
same day within a 2-hour period. If you are unable to take the exam, either on-
campus or off-campus, on the date that is scheduled for any legitimate reason
such as work schedule or traveling for business or school-related activities, you
can schedule a make-up exam using the on-campus or off-campus proctoring
services, but the exam should be done within 48 hours past the scheduled date.
Please be aware that the questions on the make-up exam may be different from
the questions on the assigned exam. If you do not make up an exam within 48
hours, you will be required to take a comprehensive make-up exam at the end of
the semester regardless of the exam you miss. Please note that a comprehensive
make-up exam includes all chapters we covered this semester. An unexcused
absence for a missed exam will result in a zero for that exam.
To get a proctoring service, visit
http://www.usi.edu/distance/students/current/proctoring.
2. The average of quizzes and assignments is counted 10% of your final grade.
No make-up quiz is given. No late assignment is accepted. I will drop the
lowest quiz. End of chapter problems are assigned for practice purposes and are
designed to help you familiarize with material through practice; therefore, it is
extremely important that you study the materials first and then work on
assignments to see how well you understand. Your effort will eventually be
reflected on your test grades. Although homework is not collected, the answers
of all homework assignments are posted.
3. Portfolio assignment is counted 10% of your final grade. A group of four
students, depending on the course enrollment, are required to form a team to
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participate in the portfolio assignment (game). Each team will manage four
investment accounts depending on the number of students in each team. The
detail assignment will be handed out the second week of the semester.
4. Your final grade for this class is assigned according to the following formula:
AttnBonus
10*Assignment Portfolioof points Available Total
points Portfolio
10*Assignment&Quizzes of points Available Total
points Assignment and Quiz of Sum80*
Examsof points Available Total
points Examof Sum
Grading Scale: A = 90-100
B+ = 87-89.99 B = 80-86.99
C+ = 77-79.99 C = 70-76.99
D+ = 67-69.99 D = 60-66.99
F = below 60
X. Academic Misconduct
Review the Student Rights and Responsibilities section of USI’s 2007-2009 Bulletin
(see pages 299-300) and the University Handbook that define and explain academic
misconduct and disciplinary action. The policies cover a variety of forms, including
cheating, fabrication, and plagiarism. If you are found guilty of academic
misconduct in this class, you will receive a grade of “F,” and you may be dismissed
from your degree program and possibly from the University. Regarding this online
course, participation in group discussions is necessary, but any irrelevant discussion
or chat will not be permitted.
XI. USI Library Resources:
a. Visit http://www.usi.edu/library/distance-learning-services to learn the resources and
services the Rice Library provides to students involved in distance education.
b. Visit USI Library at http://www.usi.edu/library/
Click Databases to access Rice Library’s 60+ Databases. You can then click on
selected database and follow login instructions. All databases are accessible on
campus or off campus unless otherwise stated.
Click Research Guides to explore the LibGuides. You will find “esearch
assistance, subject guides, and useful resources compiled by your friendly
librarians.”
Click Distance Learning Services to access contact information of Distance
Learning Librarian and Distance Learning website.
c. Visit http://www.usi.edu/library/databases to access Value Line Investment Survey
Online Access. Value Line provides its view on economy and stock market. It also
provides model portfolios for investors with various objectives and a number of
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economic and stock market statistics. Furthermore, Value Line provides full-page,
individual stock reports, including the company's past performance, current status,
and outlook, and industry reviews.
d. The University Library has more than 400 entries under the subject category
INVESTMENT and many periodicals. AAII (American Association of Individual Investors) Journal, from 1990
Business Week, from 1956
Financial Analysts Journal, from 1970
Forbes, from 1967
Fortune, from 1949
Journal of Business, from 1961
Journal of Finance, from 1966
Journal of Financial Research, from 1987
Journal of Money, Credit and Banking, from 1990
Journal of Portfolio Management, from 1989
Money, from 1974
e. ABI/Inform Global It is a convenient electronic data source to search references. For example, full texts
of the articles in Financial Analysts Journal and Journal of Portfolio Management are
available.
f. COMPUSTAT PC Plus on CD-ROM This electronic database provides approximately 500 items of financial and accounting
data of more than 10,000 firms for the recent 20 years and 48 quarters. You may
utilize this database for security analysis.
g. CRSP Data The Center for Research in Security Prices (CRSP®) is a financial research center at
the University of Chicago Graduate School of Business. CRSP creates and maintains
premier historical US databases for stock (NASDAQ, AMEX, NYSE), indices, bond,
and mutual fund securities. These databases are used by leaders in academic and
corporate communities for financial, economic, and accounting research.
h. FISOnline It is an Internet-based suite of information resources that enables in-depth business
and financial research. While the basic product includes international data, the
annual reports are for domestic companies.
XII. Academic Skills: http://www.usi.edu/university-division/academic-skills
The mission of Academic Skills is to “enhance student success and the educational
process at the University of Southern Indiana.” It offers a wide array of tutoring
programs, such as math, study skills, and writing, for students at the USI. All tutors
are certified by the College Reading and Learning Association. Academic Skills is
located in Education Center, Room 1111, and phone number is (812) 464-1743. The
Writer’s Room is located in Education Center Room 1102. An appointment with a
writing consultant is available by calling 812-461-5359.
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XIII. Americans with Disabilities Act Compliance
“If you have a disability for which you may require academic accommodations
for this class, please register with Disability Resources (DR) as soon as possible.
Students who have or who receive an accommodation letter from DR are
encouraged to meet privately with course faculty to discuss the provisions of
those accommodations as early in the semester as possible. To qualify for
accommodation assistance, students must first register to use the
disability resources in DR, Orr Center Rm. 095, 812-464-1961
http://www.usi.edu/disabilities. To help ensure that accommodations will be
available when needed, students are encouraged to meet with course faculty at
least 7 days prior to the actual need for the accommodation.”
XIV. Career Advising
Students, especially upper level class students, are encouraged to see their advisors
for career advising information. This is especially important to keep on-track in
meeting your graduation objectives. Career advising is available through your
academic advisor or other professors in your major. Please take advantage of this
opportunity to have your questions answered or to discuss the career paths open to
graduates with your advisors or professors in your major.
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Schedule for Finance 433.NO1, Fall 2014
Week Topic
1
Module 1(Chapter 1): A Brief History of Risk and Return
Introduction to Portfolio Assignment
2
Module 2(Chapter 6): Common Stock Valuation
Module 3(Chapter 5): Order Types
3-4
Module 4(Chapter 2): Buying and Selling Securities
5-6
Module 5(Chapter 4): Mutual Funds
6
Exam #1: Oct. 2 (Thursday)
7-8
Module 6 (Chapter 14): Futures
9-10
Module 7 (Chapter 15 Part I, Sections 15.1-15.3, 15.6): Stock
Options
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Exam #2: Nov. 3, (Monday)
11-12
Module 8 (Chapter 15 Part II, Sections 15.4-15.5, 15.7-15.8): Stock
Options
13-14
Module 9 (Chapter 11): Diversification and Risky Asset Allocation
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Thanksgiving Holiday: Nov. 26-30 (Wednesday-Sunday)
15
Module10 (Chapter 12): Review SML and CAPM model
Module 11 (Chapter 13): Performance Evaluation Measures: Sharpe
ratio, Treynor ratio, and Jensen’s Alpha.
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Final Exam: Choose one of these two days that fits your schedule Dec. 11 (Thursday)
Dec. 12 (Friday)
Other Dates to Remember:
Sept. 1 (Monday): Labor Day – No class.
Sept. 30 (Tuesday): Assessment Day – No class.
Oct. 13-14 (Monday-Tuesday): Fall break – No class.
Oct. 24 (Friday): Last day to drop/withdraw without evaluation
Nov. 3-14 (Mon.-Fri.): Priority registration period for spring and summer 2015
Nov. 26-30 (Wed.-Sun.): Thanksgiving Recess – No class.
Dec. 10 (Wednesday): No class
Dec. 10 (Wednesday): Schedule revision and withdrawal from the semester period ends
Dec. 11-17 (Thursday-Wednesday): Final Exam Week
Dec. 13 (Saturday): Commencement