VILLANOVA UNIVERSITY
Villanova School of Business
Department of Finance
Introduction to Investments (FIN 2323)
Spring 2003
Instructor:
Office:
Office Phone:
Office Hours:
Dr. Steven Cochran
Bartley 2078
519-6914
MWF 12:30 pm - 1:30 pm and by appointment
Required Text:
Corrado, Charles J. and Bradford D. Jordan. Fundamentals of Investments:
Valuation and Management, 2nd edition, 2002, McGraw-Hill/Irwin.
Prerequisites:
FIN 1113 or HON 1113 and Junior or Senior Standing.
Note: It is the student’s responsibility to be certain that the prerequisites have been successfully
completed. If, at any time during the semester, it is determined that a student has not completed the
prerequisites, the student can be administratively dropped from the course without credit or tuition
refund.
Course Description: This introductory course in Investments is constructed in such a manner so as
to expose the student to the basic analytical techniques within the investments area. Topics include
the institutional details of the security markets, types of investment instruments, common stock
valuation, the pricing of preferred stock and bonds, risk and return, market efficiency, modern
Capital Market Theory, and the nature of options and futures.
ASSIGNMENTS
Week
Chapter
Chapters 1-4 are introductory in nature. Topics considered are risk and return, buying and selling
securities, investment objectives and strategies, types of securities, and investment in mutual funds.
1-3
1 A Brief History of Risk and Return
2 Buying and Selling Securities
3 Security Types
4 Mutual Funds
1, 6, 7, 15
1, 8, 9, 11, 13
11, 12, 14, 17
3, 9, 13, 23
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Chapters 5-8 deal with the stock markets. Chapter 5 presents a discussion of the institutional details of the
equity markets. In Chapter 6, stock valuation models are presented. Financial statement analysis and
forecasting are discussed in Chapter 7. The concept of market efficiency is addressed in Chapter 8.
4-7
5 The Stock Market
6 Common Stock Valuation
7 Earnings and Cash Flow Analysis
8 Stock Price Behavior and Market Efficiency
13, 15
7, 10, 12, 14
15, 17, 20
Midterm Exam
(around week 7)
In Chapters 9-11, the topics of interest rates and bond markets will be addressed. Chapter 9 presents a
general discussion of interest rates. In Chapter 10, the concepts of duration, immunization, and bond
yields are presented. The basics of corporate bonds are presented in Chapter 11. Topics include the bond
indenture, callability, convertibility, the sinking fund, and protective covenants.
8-9
9 Interest Rates
10 Bond Prices and Yields
11 Corporate Bonds
3, 11, 15, 16, 18, 19
10, 11, 12, 15, 16, 21, 27
6, 7, 15, 17
Chapters 17-19 deal with portfolio management. In Chapter 17, the concepts of asset allocation and
portfolio diversification are presented. Chapter 18 discusses two major types of risk and presents several
well-known asset pricing models. In Chapter 19, several measures of portfolio performance evaluation
are presented and discussed.
10-12
17 Diversification and Asset Allocation
18 Risk, Return, and the Security Market Line
19 Performance Evaluation and Risk Management
4, 5, 9, 10, 13
1, 3, 6, 8, 14, 19
1, 2, 4, 5, 11, 14, 17, 22
Chapters 14 and 16 look at options and futures. In Chapter 14, options on common stock are examined.
Topics covered include option writing, option payoffs, option strategies, and the intrinsic value of options.
Chapter 16 discusses a number of issues related to futures contracts, including speculating and hedging
with futures, cash prices, spot-futures parity, and hedging stock market risk with futures.
13-14
14 Stock Options
16 Futures Contracts
3, 4, 5, 8, 14, 15
2, 3, 4, 13, 15, 17
FINAL EXAM
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Instruction Format: The format of this course is lecture/discussion/problem-solving. Given the
nature of the material to be covered and the format of instruction, it is essential that the student be
prepared for each class meeting.
Drop Policy: The University drop policy will be followed.
Grading Policy: There will be a midterm and a final exam. Each exam will comprise 40% of the
final grade. The examinations will be comprised of multiple choice and/or “word problems”. The
final exam may test the student over material covered on the midterm exam.
A term paper will comprise the remaining 20% of the final grade. This assignment is descriptive in
nature and will be on a topic, within the investments area, of the student's choice. The student must
inform the instructor in writing of the topic chosen and receive the instructor's approval before
starting work on the paper. The paper should be approximately 10 pages and be prepared in an
acceptable format (for example, see A Manual for Writers of Term Papers, Theses, and
Dissertations, Kate L. Turabian; The University of Chicago Press). The term paper is due on the
last day of regularly scheduled classes. Late papers will not be accepted.
Midterm Exam
Final Exam
Term Paper
40%
40%
20%
100%
Make-up Exam Policy: Exam dates will be announced in advance. Make-up midterm exams will
not be administered. If a student has a valid excuse for not taking the midterm exam, the final
exam will comprise 80% of the final grade. If a student fails to take the midterm exam and does
not have a valid excuse, the student will receive a grade of zero on the exam. If a student has a
valid excuse for not taking the final exam during the scheduled time, it is expected that the exam be
taken as soon as is possible. If a student fails to take the final exam at the scheduled time and lacks
a valid excuse, a grade of F will be received as the final course grade. The instructor will determine
what constitutes a valid excuse for not taking an exam.
Stock-Trak Game: In this class, you will play the Stock-Trak portfolio simulation game. You
will begin with an account containing $500,000 that you can invest in a number of financial
instruments such as stocks, bonds, mutual funds, options, futures, etc. You will be informed on
how to register and obtain the (Stock-Trak) regulations corresponding to the game. I will provide
you with additional instructions. It is your responsibility to comply with all regulations and
instructions. It is mandatory that you participate in the game. All students will earn bonus points
(points added to the score on the final examination) on the following basis: (1) at the end of the
game, students’ portfolio values will be ranked; (2) students whose portfolio values rank in the top
one-third of all portfolios will receive eight bonus points; (3) students whose portfolio values rank
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in the middle one-third of all portfolios will receive five bonus points; and (4) students whose
portfolio values rank in the bottom one-third of all portfolios will receive two bonus points.
On the last day of regularly scheduled classes, each student must turn in a brief (1-2 pages)
description of their Stock-Trak experience (the investment strategy and asset allocation strategy
used; the rationale behind the various trades that were made; mistakes that were made and what was
learned; etc.).
Grading Scale: The following grading scale will be utilized in the assignment of grades:
A
AB+
B
BC+
C
CD+
D
DF
93-100
90-92
87-89
83-86
80-82
77-79
73-76
70-72
67-69
63-66
60-62
Below 60
Attendance: Attendance is not mandatory, but should be viewed as extremely important in a
course of this type. The instructor will bear no responsibility for material that is not understood due
to the failure of the student to attend class
Responsibility of Student: It is the responsibility of each student to understand the course
guidelines as outlined herein and to make every reasonable effort to complete and understand all of
the course assignments and requirements. For students experiencing difficulty, the instructor is
always ready to help.
Academic Integrity Course Requirements: The code of academic integrity of Villanova
University addresses cheating, fabrication of submitted work, plagiarism, handing in work
completed for another course without the instructor's approval, and other forms of dishonesty. For
the first offense, a student who violates the code of Villanova University will receive zero points for
the assignment. The violation will be reported to the Dean's Office and recorded in the student's
file. In addition, the student will be expected to complete an education program. For the second
offense, the student will be dismissed from the University and the reason noted on the student's
official transcript.
Statement on Disability: If you have a disability that may affect your success un this course and
wish to discuss academic accommodations, you must arrange to meet with the instructor as soon as
possible but no later than the second week of the semester. Any assertion of disability must be
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documented.
Note: Registration in this course indicates that the student has read, understands, and agrees to all
items contained in this syllabus, including all changes made by and announced in class by the
instructor. Additionally, it is the right of the instructor to change any item of the syllabus and
course guidelines presented above (with the exception of the Academic Integrity Course
Requirements) without the prior approval of the students enrolled in the class.
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