FACULTY OF MANAGEMENT FUNDAMENTALS OF INVESTMENTS MGT 3412 Y - FALL 2015

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1 FACULTY OF MANAGEMENT FUNDAMENTALS OF INVESTMENTS MGT 3412 Y - FALL 2015 WEDNESDAYS, 6:00 P.M. 8:50 P.M. ROOM: S2013 INSTRUCTOR CFMRT SUPPORT OFFICE HOURS COURSE MATERIALS Grahame Newton, B.A., M.B.A., CFA grahame.newton@uleth.ca Phone: For technical assistance with the trading software we will be using in the course, please Clayton Varjassy varjassy@uleth.ca Before classes 5:00 p.m. to 6:00 p.m. by request Required Textbook: Investments, 8 th Canadian Edition. Bodie, Kane, Marcus, Perrakis, Ryan McGraw-Hill Ryerson, 2015 ISBN: (Order through bookstore.uleth.ca) PREREQUISITES: MGT 3040 AND One of ECON 2900 OR STAT 2780 COURSE DESCRIPTION Topics to be covered include risk and return analysis, security analysis (technical and fundamental), efficient markets, diversification, equity valuation, managed funds, financial statement analysis, basic theoretical models, including the capital asset pricing model and the arbitrage pricing model, and an introduction to options. The course is intended to provide students with a basic understanding of the various types of investments, how marketable securities are traded and how investment decisions are made. The course content consists of a combination of practical and theoretical material, including an examination of fundamental investment concepts (e.g. risk vs. return), MGT 3412 Y Fall

2 an overview of the capital markets and how they are regulated, methods used to evaluate and select securities, modern portfolio theory and market efficiency. As part of the course, we will be introducing students to applications available through the Centre for Financial Market Research and Teaching (CFMRT) at the Lethbridge campus, which can be accessed from Calgary. These applications include Financial Trading System (FTS), a web-based software package, and the Rotman Interactive Trading (RIT) market simulation platform of the University of Toronto Rotman School of Management. Manuals for FTS and RIT are available on the CFMRT page on the Faculty of Management website. These applications are used extensively in more advanced courses offered at the U of L. The intent here is to expose students to their basic features in preparation for the later courses. Staff from the CFMRT will be on hand to provide support during the classes where the software is used. COURSE LEARNING OBJECTIVES Upon successful completion of the course, students will understand the various types of securities in which individuals and institutions can choose to invest, such as stocks, bonds, mutual funds, options and futures, and how these securities are traded in the markets. The course will cover the basic principles of how investments are made and the factors that investors must take into consideration when making investment decisions, including risk and return, diversification, tax implications, time horizon, etc. Students will also know how to construct an efficient investment portfolio that minimizes risk and/or maximizes return. Finally, through the use of trading simulation software, students will gain some initial exposure to securities trading that will serve as a foundation for future finance courses on topics such as derivatives and portfolio management. METHOD OF ASSESSMENT ASSIGNMENT VALUE DUE DATE Quizzes (4) 20% (4 x 5% each) Sep. 23, Oct. 7, Nov. 4, Nov. 18 FTS System Diversification Project 10% Assigned Sep. 30 Report Due Oct. 14 Mid-Term Exam 30% Oct. 21 RIT Cases (4) 10% Held in Class Dec. 2 and Dec. 9 Final Exam 30% Dec. 16 Total 100% MGT 3412 Y Fall

3 GRADING SCHEME Percent Mark Letter Grade Percent Mark Letter Grade A A A B B B C C C D D 0-49 F Please note that the preceding grading scheme is used, but it is only approximate and subject to change by a couple of percentage points up or down, depending on the grade groupings at the end of the semester. COURSE POLICIES 1. Prerequisites. It is the responsibility of students to check the prerequisites for courses before registration. If students are found to be registered in a course for which they do not have the prerequisites, and they have not received prior permission from the appropriate program chair, they can be de-registered. If this occurs after the drop/add date, tuition will not be refunded. 2. Quizzes and Mid-Term Exam. Alternative arrangements for writing a missed mid-term examination or quiz may be made at the discretion of the instructor. Deferrals may only be granted in extenuating circumstances beyond the student s control. 3. Final Examinations. Students who fail to write final exams must provide satisfactory evidence of illness or extenuating circumstances AND must have the approval of the Dean for a makeup exam. Work commitments, holidays or traffic are not considered legitimate reasons for missing an exam. For unsubstantiated missed final exams that are not approved for a makeup by the Dean, a grade of F (0 marks) will be given. Deferred final exams can only be written at times set by the school and instructor. Please note that if a final exam deferral is granted, the date will be set by the instructor and department. Students who fail to write a deferred final examination must provide satisfactory evidence of illness or extenuating circumstances AND must have the approval of the Dean for a makeup exam. Work commitments, holidays or traffic are not considered legitimate reasons for missing an exam. For missed deferred exams, a grade of F (0 marks) will be given. 4. Conduct of Examinations. The instructor may articulate regulations for late entry to and early exit from the examination room. Instructors may also prescribe or restrict materials that may be used during the exam. No material aids including such items as: mobile phones, computers, or other digital devices, may be brought into the examination site without prior approval from the instructor. Please see additional examination policies in the 2015/2016 University Calendar page Academic Dishonesty and Plagiarism. Academic dishonesty and plagiarism will not be tolerated and will automatically result in a zero grade for the submission. Any student caught plagiarizing may also be subject to additional University sanctions. The University of Lethbridge subscribes to an electronic plagiarism detection service. Students may be required to submit their written work in electronic form for plagiarism checking. MGT 3412 Y Fall

4 6. Student Conduct. The University s policies are described in the calendar and all students are expected to read, familiarize, and comply with them. Special care should be taken to understand the Student Discipline Policy for academic and non-academic offenses as listed in Part 4, Sections 4 through 8 of the 2015/2016 Academic Calendar. Students will respect the basic standards of intellectual integrity, including, but not limited to, refraining from plagiarism, cheating or duplicating someone else s work. In addition, students are expected to take an active role in encouraging other members of the academic community to refrain from academic dishonesty, and are asked to advise the instructor if they are aware of any such violations. This provision applies to any work submitted as a group project. PERFORMANCE ASSESSMENTS 1. Quizzes. The four quizzes will be 30 minutes in length. All will be held in class and will cover text readings and lecture material. The questions may be true/false or multiple choice. 2. Trading Software. Students will receive classroom instruction and are encouraged to review the RIT tutorials on the CFMRT website in order to acquaint themselves with how the various applications work. The training will be needed to complete the four in-class RIT cases that form part of the course. The introduction to the trading software is scheduled for the Nov. 25 class, when staff from the CFMRT will be on hand to assist. As it is essential to be able to use the software to complete the cases, it is critical for you to attend the Nov. 25 class. If you do not take part in the training, it cannot be repeated at a later date and you will be unable to finish all of the course work. Working with the software will provide you with hands-on experience in trading securities, but will also serve as a good foundation for future advanced finance courses. It is recognized that this is the first exposure many students will have had to trading software and it is not essential for them to outperform other students or to exceed benchmarks to obtain good marks in the cases. Participation is the key! 3. Assignment. The portfolio diversification assignment involves constructing a well-diversified portfolio that is designed to achieve a targeted return. This will be done using the FTS software and the Solver function in Excel. Instructions for the assignment will be given on Sep. 30 and the report is due on Oct. 14. Assignments handed in late will be penalized 2 marks out of the maximum 10 for each day past the due date. Assignments handed in more than four days late will receive a mark of Exams. The mid-term exam will be 1 ½ hours in length and the final exam will be 2 hours in length. Both may consist of a variety of question types, including multiple choice, true/false and calculation questions. The exams are subject to all applicable University of Lethbridge exam regulations. CLASSROOM EXPECTATIONS Please show respect toward fellow students and the instructor by showing up to class on time and observing the normal courtesies extended to others while in the classroom. Students should understand that regular attendance and participation in classroom discussions are essential to succeed in the course. If you must miss a class, you will have to make arrangements with a fellow student to catch up on the material missed. MGT 3412 Y Fall

5 CLASS SCHEDULE Below is a tentative outline. Recognizing that teaching excellence requires a degree of flexibility and responsiveness to both students' needs and emergent circumstances, efforts will be made to adhere to the schedule, but some adjustments may be necessary during the semester, depending on the actual progress made and the material covered. Modifications to the course outline may sometimes be necessary, provided that no student is disadvantaged by the change. Sep. 9 Sep. 16 Sep. 23 Sep. 30 Oct. 7 DATE PRE-CLASS READING AND TOPIC SIGNIFICANT DATES Course Introduction Investment Environment Financial Markets and Instruments Chapters 1, 2 Risk and Return Capital Allocation to Risky Assets Chapters 4, 5 Optimal Risky Portfolios Capital Asset Pricing Model Index Models Arbitrage Pricing Theory Market Efficiency Equity Evaluation Models Oct. 14 Financial Statement Analysis Oct. 21 MID-TERM EXAMINATION Oct. 28 Behavioral Finance and Technical Analysis Chapter 10 Nov. 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 9 Dec. 16 Mutual Funds and Hedge Funds REMEMBRANCE DAY NO CLASSES Trading on Securities Markets Introduction to Options Bond Prices and Yields Managing Bond Portfolios FINAL EXAM QUIZ 1 Chapters 6, 7 FTS Diversification Project Assigned (Due Oct. 14) Chapters 8, 9 QUIZ 2 Chapter 16 FTS Diversification Project Due Chapter 17 QUIZ 3 Chapter 23 QUIZ 4 Chapter 3 INTRODUCTION TO TRADING SOFTWARE (ATTENDANCE CRITICAL) Chapter 18 RIT CASES 1 AND 2 RUN IN CLASS Chapter 12 RIT CASES 3 AND 4 RUN IN CLASS Chapter 14 MGT 3412 Y Fall