Finance 312

INVESTMENTS

Fall 1998

 

Dr. Arthur C. Gudikunst e-mail: agudikun@bryant.edu

Suite G, Room 459, Telephone Ext. 6387

Office Hours: Tuesday 3:00-5:00 pm, Thursday 3:00-6:30 pm

Other times by appointment

 

INTRODUCTION:

 

This is the basic course dealing with investing in marketable securities. We will focus attention on the operation and mechanics of the securities markets, evaluation of debt and equity securities, the impact of risk and return on general investing strategies, and an introduction to derivative securities, such as options and futures contracts.

 

This will be a survey course of basic investment and securities analysis, with primary emphasis on stocks and bonds. The instructor assumes that students have already completed the course "Financial Management" (FM), and have been exposed to statistics and regression analysis. We will build on the tools and understanding of decision-making within the corporation developed in FM, but our focus will be as an external investor, not an internal corporate manager. The techniques of financial statement analysis from FM will be applied in this course. Computer work with Excel or other spreadsheets will be an integral part of this course activity.

 

After completion of Fin 312 Investments, students may consider taking Fin 454 Advanced Investments (which deals with managing portfolios of securities and efficient capital market theory from a professional manager's perspective). Other courses in investments are Fin 358 Debt Securities and Fin 357 Equity and Commodity Derivatives (which studies the use of options and futures contracts in advanced arbitrage, hedging and speculative applications for both individual and professional money managers).

 

This Investments course will be conducted with a combination of instructor-led class presentations and discussions on the assigned text readings (and outside readings as indicated), text problem assignments, a real-time investment simulation, examinations and term-project. Time commitment to the course will be intensive, so plan accordingly.

 

COURSE GRADING POLICY:

 

1. Assignments required for submission to instructor will be due on assigned date. Late papers will be penalized.

 2. Quizzes may be used at any time, announced or unannounced, at discretion of instructor. For grading purposes, only 75 percent of quizzes will be counted. THERE WILL NOT BE ANY MAKE-UP QUIZZES! (IF YOU MISS CLASS, YOU MISS THE QUIZ)

 3. Mid-term and final examinations must be taken on assigned dates. Absences from exams can only be negotiated IN ADVANCE with instructor's consent. Notes and calculators are allowed in class examinations.

 4. Term project progress reports and final report must be submitted at designated dates. Late penalties will be assessed.

 5. Missing assignments will be graded as ZERO, not an F.

 6. Attendance will not be used for grading purposes directly. However, in-class participation will be evaluated and used in determination of final grades.

 7. Final grades are FINAL. There will be no discussions of grades after FINAL grades are submitted to registrar.

Grading Standards: A 93.0 points or better

AB 88.0 to 92.9 points

B 83.0 to 87.9 points

BC 78.0 to 82.9 points

C 73.0 to 77.9 points

CD 68.0 to 72.9 points

D 60.0 to 67.9 points

F below 60 points

 

Grading: Mid-course examinations 30%

Assignments 10%

Term project (Sec. Anal.) 20%

Quizzes and Class participation 20%

Final Examination 20%

 

Required Textbook:

(TEXT) CHARLES P. JONES. INVESTMENTS 6th ED.

IRWIN , INC. 1998

 

Daily access to Wall Street Journal or New York Times

COURSE OUTLINE AND ASSIGNMENTS

 WEEK OF: READINGS AND ASSIGNMENTS

 

Sep 1 Introduction to Investing, Securities and Markets

Read (TEXT) Chap 1, 2 and 3

 Sep 8 and Market Trading and Risk- Return Mathematics

Sep 15 Read (TEXT) Chap 5, 6 and 7

Ch 5. (Prob 1,3,4) Ch 6. (Prob 3,6,21-25)

Ch 7. (Ques 24, 25) (Prob 2,3)

 

Sep 22 Common Stock Analysis and Valuation

Read (TEXT) Chap 13 and 14

Ch 13. (Prob 6, 9,10,17,22)

 

Sep 29 Common Stock Analysis and Strategies

Read (TEXT) Chap 15 and 16

Ch 15. (Prob 1) Ch 16. (Ques 13)

 

Oct 6 Common Stock: Industry and Company Analysis

Read (TEXT) Chap 16 and 17

Ch 17. (Prob 1, 3)

*** EXAMINATION 1 ***

 

Oct 13 Portfolios and the Capital Asset Pricing Model

Read (TEXT) Chap 7, 8 and 9

Ch 7. (Ques 13-22) (Prob 2,3) Ch 8. (Ques 13-18) (Prob 1, 2,3)

Ch 9. (Prob 2,3,7)

 

Oct 20 Technical Market Analysis and Market Efficiency

Read (TEXT) Chap 910 and 18

Ch 10. (Ques 1-12)

 

Oct 27 and Bond Securities and Analysis

Nov 3 Read (TEXT) Chap 11 and 12

Ch 11. (Prob 1-3, 4,7,10,15, 22) Ch 12. (Ques 3-7)

 

Nov 10 Introduction to Mutual Fund Investing

Read (TEXT) Chap 22 and 6

Ch 6. (Prob 33-38) Ch 22. (Prob 1,2,5)

*** EXAMINATION 2 ***

 

Nov 17 Introduction to Call and Put Options Contracts

Read (TEXT) Chap 19

Ch 19. (Prob 1,2,3,4)

 

Nov 24 Introduction to Futures Contracts

Read (TEXT) Chap 20

Ch 20. (Ques 1-5) (Prob 1,2)

 

Dec 1 Uses of Options and Futures in Investing

Presentation of Company Analysis Projects

**Final Exam Review**

 

Dec 9-16 *** Final Examination (Comprehensive) ***

 

 

Company Investment Recommendation Report

Select a company and industry (from the companies on the instructor's list) and at least two other companies in that industry classification (select the other companies with different sizes and exchanges). Prepare an analysis of the industry and operation of the three companies selected, using fundamental performance analysis and stock pricing models. Make a final investment recommendation (strong buy, buy, hold or sell) as a security analyst on the industry and the three companies. Final report is due on Dec. 7, 1998. Two person team reports are allowed, BUT ONLY TWO STUDENTS/TEAM.

 

Portfolio Simulation Project:

This simulation of managing an equity portfolio will only last a short period of three months. You will be required to keep your own records on an Excel spreadsheet, and will submit both a written report and a copy of the spreadsheet file to the instructor at the end of the semester. Trading will be restricted to the following 12 stocks:

 

1. AT&T symbol T telecommunications

2. Am Express symbol AXP financial services

3. CocaCola symbol KO beverages

4. DuPont symbol DD chemicals

5. Hewlett Packard symbol HWP computers, electronics

6. Intl Paper symbol IP paper and paper products

7. Johnson & Johnson symbol JNJ drugs and medicines

8. Phillip Morris symbol MO cigarettes

9. Sears symbol S department stores, retailing

10. United Technology symbol UTX technology and aerospace

11. Yahoo symbol YHOO web technology

12. Microsoft symbol MSFT personal computer software

 

You will start with $100,000 cash in your margin account (assume 50 % initial margin). You may invest in any of the stocks listed above, either going long or short. You may also invest in T-bills or Treasury Bonds (assume par is $10,000 per bond or bill). Trading may be done on Monday of each week, but the price will be the Tuesday opening price. Submit trades to instructor on Tuesday in class, in written form.

You may work in teams of two if desired, but you must do all record keeping on the status of the portfolio, and report the balance sheet of your account each Tuesday class meeting. Two person student teams are allowed.