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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: mwchen@usi.edu

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

(mwchen@usi.edu), 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