Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
Professor:
Dr. John Kensinger
BLB 336B
940-565-2511 (office)
email: kensingerj@mac.com
http://www.cob.unt.edu/firel/kensinge
Office hours: 1:00-2:00 PM Wednesday
5:15-6:15 PM Monday
Also available in classroom after class (please remain in the classroom if you want to see me
after class)
Class Time:
BLB 281
6:30-9:20PM Monday
Finance Tutor Lab:
BLB 132
369-7948
Open Monday through Saturday
Texts and Readings:
1. Zvi Bodie, Alex Kane, & Alan Marcus, Investments (10th Ed.), McGraw-Hill (2014) ISBN
978-0071262286.
2. Burton Malkiel, A Random Walk Down Wall Street (10th Ed.), WW Norton (2011) ISBN 0393-06245-7.
Burton Malkiel’s book has been a best-seller for several decades, and is a joy to read. I
suggest you read the whole thing right away, perhaps over the next weekend (it is great
beach reading). Then refer back to ideas like market efficiency and modern portfolio theory
as we come to them in the normal progression of the course.
A hardcover 11th Edition (January 2015) is also available, but the paperback of the 10th
edition (or earlier editions) would work just fine. There is also a Kindle version of this
classic.
3. Additional readings will be handed out as scheduled below. Most handouts are available for
download at www.coba.unt.edu/firel/kensinge/fina5210
Catalog Description:
Investment Analysis and Management: 3 hours. Economic and industry studies, company
analysis, selection of senior securities, theory and application of common stock valuation
models, security markets and timing, portfolio management, options and futures markets.
Prerequisite(s): FINA 5170 or equivalent; ECON 1100 or 5000 or equivalent; MSCI 5180 or
equivalent; ACCT 2030 or 5020 or equivalent; MATH 1190 or equivalent, or consent of
department.
Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
Disability Accommodation:
The College of Business Administration complies with the Americans with Disabilities Act
in making reasonable accommodation for qualified students with disability. If you have an
established disability as defined in the Americans with Disabilities Act and would like to request
accommodation, please see me as soon as possible. My office hours and office number are
shown on this syllabus.
Student Investment Group (SIG):
The College of Business Administration has entered into an agreement that all students
taking investment-related courses shall be strongly encouraged to participate in the Student
Investment Group (SIG). The group manages an endowment to be used for future student
scholarships. An article about the SIG from the Denton Record Chronicle (12/31/03, p.1A) is
attached to this syllabus. Adequate participation is determined by the SIG membership and
faculty advisors, and is reported to the faculty at the end of the semester. All students in FINA
5210 have opportunities to participate in the SIG via meetings of the organization, investment
analysis for the portfolio management committee, and via the web resources the SIG sponsors.
Students who have satisfactory participation in the SIG will receive five (5) bonus points on the
final examination (this is equivalent to half a letter grade increment on the grading scale for this
exam). For the latest information about the SIG and its activities, see the website at
orgs.unt.edu/sig
Purpose of the Course:
The course is concerned with the concepts and techniques employed in placing capital into
the global marketplace, in order to earn a competitive rate of return relative to risk. The role of
the global financial markets in accomplishing an optimal allocation of economic resources
around the world is a central issue. Students should finish the course with a much-improved
understanding of the functioning of the interrelated global markets for securities, futures,
options, commodities, and business units. The focus is on the tools and concepts needed by
finance professionals, and may go beyond the needs of students primarily interested in managing
their personal portfolios.
Prerequisite Courses and Knowledge:
Students should already have completed the core course in finance or its equivalent. Some of
the course problem sets use compound interest calculations to develop advanced concepts, but
the course is designed on the assumption that students are already familiar with the basic
mathematics of compound interest and can operate a financial calculator. Likewise, the course is
designed upon the assumption that students are already familiar with the basic definitions of
security types.
Calculators:
You will need a financial calculator. This is the minimum standard among financial
professionals, and a suitable one can be bought for less than the price of a textbook. For overall
value per dollar in the current generation of calculators I suggest the Hewlett-Packard HP-17B
(price from HP is $100). At the lower end of the HP line, the HP-10B offers all necessary
capabilities for this course at an affordable price (price from HP is $30). If you can find one, the
HP-19B offers the most advanced capabilities available in the calculator market (it’s out of
production now). In addition, the classic HP-12C is back in production, although it is not as
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Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
advanced as the 10 or 17 (or as good a value). When ordering HP calculators, be sure you are
getting the business version and not the science/engineering version.
You may also want to consider the Texas Instruments (TI) BA-II Plus, since in-class
demonstrations will use a projection version of this calculator. If you choose this route, you
won’t save much money, and you will give up in time much more than you save in dollars.
A word of caution is in order: if you buy a used calculator be sure to get a complete
instruction manual, otherwise you’ll have a paperweight with great potential. You may be able
to download a manual from the manufacturers website, but be sure to verify this before buying.
If you are considering some other calculator you will need to be sure it can do all the
financial calculations involving present and future value of single sums, annuities, uneven cash
flows, interest rate calculations for single sums or annuities, and internal rate of return for
uneven cash flows. (The TI-BA 35 Solar calculator does not have all the features needed for the
course.)
Calculators are required for examinations.
Grading:
Homework problem sets will not be graded. Course grades will be calculated using the
following weights:
20%
25%
25%
30%
Course Grade
Report
First Examination
Second Examination
Final Examination
Scores on the exams will be converted to letter grades using the following guidelines:
Grading Chart
A: 90%-100% D: 60%-70%
B: 80%-90% F: below 60%
C: 70%-80%
Makeup or re-scheduled exams will be allowed only with valid medical justification, because
of some other documented personal emergency, or by prior arrangement to accommodate some
other unavoidable conflict. Routine makeup exams must be completed prior to the next class
meeting (to schedule the makeup, contact the Faculty Support Center, 940-565-3139, email:
CoB-FacSupCtr@unt.edu). In case of prolonged incapacitation that is documented, other
arrangements will be tailored to fit the particular situation. A student who does not make up a
missed examination or does not contact the instructor may be dropped for non-attendance.
An optional grading formula may be selected at the time of the final exam. The option
would allow reduction of the weight from 25% to 10% for any of the preceding exams (with
offsetting increased weight on the final exam). This option is available upon request at the time
of the final examination, with no other conditions except that choice of the optional grading
formula cannot be changed after the fact.
Cell phones must be turned off and put away during examinations. Absolutely no text
messaging or wireless email is allowed during examinations. Those leaving the examination
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Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
room for any reason may not use cell phones and other wireless devices or discuss the exam with
anyone while the examination is still under way.
Report and Library Assignment:
The report required for this course is a short paper (3 pages) reporting a golden investment
opportunity you have found through diligent research (and that hopefully very few other people
in the world have noticed—yet). First, read the excerpts from Malkiel’s book concerning the
“firm foundations theory” and the “castles in the air” theory (this material is available on the
class website). Think about the two theories and pick the one you want to use (for purposes of
this report, I do not have a favorite). Then go to the library and familiarize yourself with the
various investment information sources such as Moody’s, Standard & Poor’s, Predicasts, and
Value Line. You will also find abundant information sources on the Worldwide Web. Combine
this information with your own personal interests, pick an as-yet-undiscovered potential future
blockbuster, tell which theory you are using (firm foundations or castles in the air), explain why
you think the investment is great, discuss why others have not yet discovered it, and explain why
others will soon be forced to notice it. As Malkiel points out, the best investment inspirations
typically come when a market-savvy person finds something that arises from personal interests
(for example, you may like to ski and know about a little company that makes wonderful skis).
Your investment may take any form. It should be accessible to individual investors of average
means (if it is not, you would need to include an explanation of the changes or reforms in the
investment market that would be necessary in order to make it accessible). The report is due
Monday, November 24th.
Tips on Study Management:
• Read all the appendices associated with assigned chapters.
• Familiarize yourself with assigned readings prior to the lectures. A good strategy would be to
skim for a general grasp of the issues before the lecture, and then do your focused study
afterwards. It is essential not to get behind, since the new topics build on past material.
• Problem sets are designed to stimulate class discussion and provide exercise in preparation for
the examinations. They will not be graded in and of themselves. Give the problem sets your
best shot before we discuss them in class, even though they will not be collected or graded. By
all means, don’t look at the solutions until you have given the problems your best shot.
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Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
Class Schedule:
August 24:
Course introduction.
Topic 1:
Introduction to the game and its environment, with a review of the
touchstones of finance
Bodie: Chapters 1, 2, 4
Wall Street Journal video: Includes interviews with several well-known entrepreneurs. Watch
closely for information on the following subjects:
Acquisitions
Initial Public Offering
Investment Banking
Private Financing
Risk Allocation
Role of Underwriters
Strategic Alliances
Strategic Management
Valuation
Venture Capital
Aug 31: Topic 2:
Structure and efficiency of the financial markets
Bodie: Chapters 3, 11, 12
Case Study: Tomago Aluminium
September 7: Labor Day Holiday (no class)
Sept 14: Topic 3:
Discounted cash flow models of security valuation, and theories to explain
the term structure of interest rates
Bodie: Chapters 14,15,16, 18
Problem Set 1: Security Valuation
Problem Set 2: Coping with changing price levels
Sept 21: Topic 4:
Portfolio theory, the value additivity principle, and Tobin’s separation
theorem
Bodie: Chapters 5, 6, 7, 8, 25
Sept 28: Topic 5:
The Capital Asset Pricing Model (CAPM) and portfolio performance
evaluation
Bodie: Chapter Chapter 9, 24
Problem Set 3: Risk/Return analysis
Oct 5:
Topic 6:
Arbitrage Pricing Theory (APT)
Bodie: Chapter 10, 13
Oct 12:
FIRST EXAMINATION (covers Topics 1 through 6 and Problem Sets 1, 2, 3)
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Course Syllabus
Oct 19
Topic 7:
FINA 5210: Investment Analysis & Mgmt
Fall 2015
Commodities, futures, and forward contracts
Bodie: Chapter 22, 23
Readings packet on futures (handout)
Oct 26:
Topic 8:
Option Pricing Theory (OPT)
Bodie: Chapters 20, 21
Problem Set 4: Futures, options, and arbitrage
Nov 2:
Topic 9:
Portfolio insurance and arbitrage across markets
Bodie: pp. 689-698, 748-752
Nov 9:
Topic 10: Bond portfolio management, interest rate risk management, and arbitrage in
the bond market
Problem Set 5: Advanced problems in arbitrage
Case Study: More Applications of Derivatives
Nov 16: SECOND EXAMINATION (comprehensive, covers Topics 1 through 10 and
Problem Sets 1 through 5)
Reports due Nov 23rd
Nov 23: Topic 11: More about arbitrage in equities
Bodie: Chapters 17, 26, 27, 28
Topic 12: Agency costs and the good side of financial leverage
Jensen, “The Eclipse of the Public Corporation” (handout)
Chen, Conover, Kensinger, “Proven Ways to Increase Share Value” (handout)
Case Studies: Corporate Restructuring
Nov 30: Case Study: How Will the Investment Game be Better in the Future?
Course review
Dec 7
COMPREHENSIVE FINAL EXAMINATION (covers Topics 1-12 and Problem
Sets 1-5)
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Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
Denton Record Chronicle, 12/31/03, p. 1A
Students learn to invest
Real money, real experience
08:30 AM CST on Wednesday, December 31, 2003
By Matthew Zabel / Staff Writer
An Austin man gave University of North Texas students $285,000 and an order: Don't invest it
all in one place.
UNT's Student Investment Group recently began buying its first blue-chip stocks and other safe
securities, and members are anxious to see the portfolio grow.
Col. Guy M. Cloud donated the money recently in order to form the investment group, which is
open to all UNT students.
"I think a lot of people don't know how to invest, and the university is one of the best places to
learn how to invest in our competitive society," Cloud said.
Students and their faculty advisers said they are thrilled they will have the opportunity to gain
lessons investing real money, an experience that's worth much more than merely watching the
markets.
The student group formed last year and created an executive board. Since then, the members
have been studying the markets to figure out how best to invest the money, which came in the
form of a universal life insurance policy and an annuity.
In November, the student board decided to cash in $50,000 of the annuity, which is worth about
$74,000, and invest it in 12 blue-chip securities like Coca-Cola and General Electric. The group
plans to invest the rest in the spring.
The group chose nine securities at an October meeting. Then faculty members advised them to
consider adding a few more. In November, the group voted to add three more. General Electric
was one of them.
"I'm glad the faculty pushed for G.E. That's a very diverse company," said Chris Carlson, a
senior, who is also a member of a portfolio management committee. "It's not just light bulbs and
X-ray machines."
Board Chairman Jason Bottenfield said now that trading has begun, he expects students in the
group to gain a lot of practical experience with the stock market.
"We don't really get to apply the stuff we learn in school," said Bottenfield, a senior finance
major. "It's all theoretical, but here we get to apply it and get experience with handling real
money."
The group plans to keep the life insurance policy, worth more than $200,000, intact for now until
the group can study its options more.
The policy value doubles when Cloud dies.
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Course Syllabus
FINA 5210: Investment Analysis & Mgmt
Fall 2015
The student board of directors must vote on how to manage the portfolio. Those votes are based
on recommendations of the portfolio management committee, a smaller group of students that
studies the securities and the markets.
All the group's transactions need approval from faculty adviser Dr. Don MacDonald, an
associate professor of finance.
MacDonald and other members of the finance faculty offer suggestions to the group, but he
makes it clear that he doesn't make the decisions; the students do.
His main role is to make sure the group has followed the guidelines and bylaws laid out in the
university's agreement with Cloud.
"When they go out looking for a job, its easier for them if they can claim they have real
experience handling real money," MacDonald said.
The group also has access to the university's computer software that allows instant trading,
MacDonald said.
Emily Demars, a senior majoring in international studies, said she hopes to become involved in
the global market, so the group is helpful for her.
Because the investment group is still young and has only recently established its portfolio, the
semester has been a little slow, "but it will be exciting once we get into it," she said.
Cloud also initiated a $250,000 matching gift campaign to raise more money for the fund. A
donor or a combination of donors must contribute at least $250,000, for him to match it.
When the funds reach the permanent principle amount of $1 million, scholarships will be created
for UNT students from the earnings and increase in value with the account.
Professors in the College of Business also are working to raise money for a formal trading room
and new equipment for the group to use.
Now, the group meets in a classroom and has a small office for a trading room.
Finance professors would like to see a trading room on the south end of the business building
that would be large enough to hold the group's meetings and have plasma-screen computers for
trading. Such a room would be a showcase for prospective students, they said.
Bottenfield said the group, which has fewer than 100 active members, should grow faster now
that the group is trading real money. Any student interested in investing is welcome in the group;
students taking investment-related classes are especially encouraged to join.
"This experience will help astronomically," said Bottenfield, who graduates in December. "I
want to move into asset management, and to do that, I need to know how to read the stock
markets. You only learn this by the osmosis of having the terminology used all around you."
For more information about the investment group, e-mail the group at SIG@bottenfield.com or
call Bottenfield at 214-450-4733. The group's Web site is orgs.unt.edu/sig.
MATTHEW ZABEL can be reached at 940-566-6884. His e-mail address is
mzabel@dentonrc.com.
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