INVESTMENTS
BFIN 3403
FALL 2003
Instructor: Dr. Juan R. Castro
Office: LH 102
Phone: (903) 233-3396
Office Hours:
MW: 9:20 – 10:15.
E-mail: JuanCastro@letu.edu
11:20-12:15, or by appointment
Web Site: www.letu.edu/people/juancastro
CHECK the Class BLACKBOARD: http://online.letu.edu for updated information about the class
MATERIALS
Textbook: INVESTMENTS By Bodie, Kane, and Marcus, McGraw-Hill 6th edition
ISBN: 0-07-286178-9 (Required)
Extra readings will be requested and additional material might be handed out or placed on reserve at the
library. We have subscribed the class to the Financial Times and students are expected to discuss at least
one financial topic from this magazine once a week.
Investment Game: STOCK-TRAK Portfolio Simulation game.
Internet Tutorial and Investments Cases: http://www.mhhe.com/business/finance/bkm/
COURSE DESCRIPTION
This course provides a basic understanding of investment analysis and portfolio management. The
student is expected to gain basic understanding of different financial instruments, markets, portfolios, and
security analysis. Emphasis will be placed on analyzing investment risk and return, stock and bond
analysis, financial ratios and instruments, and modern portfolio theory. The students are expected to apply
their knowledge through different means such as working in investment cases, investment and portfolio
games, using spreadsheet modeling in investments, and analyzing stocks for different corporations. We
will use Problem-Based-Learning (PBL) methodology to develop a significant portion of the course. PBL
relies on active individual and group participation by means of cases, research, simulation games, stocks,
data, and company analysis.
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OBJECTIVES
Be competent in understanding basic investment risk and return.
Understand modern portfolio theory and its applications.
Develop an understanding of stock and bond analysis and financial ratios.
Be able to make a complete financial analysis of a company.
Introduce students with knowledge in stocks valuation
Develop basic skills to understand how the financial market works by playing an investment game.
Apply portfolio selection by using a real case scenario and modeling.
Guide the student to correlate investment with Christian principles
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GRADING
Exam I
Exam II
Exam III
Final Comprehensive Exam*
Portfolio Management and Index
Cases and Assignments
Quizzes, Readings, Hmwks, and Series exams
Playing the Stock Market Simulation
Attendance
15%
15%
15%
(45% optional)
25%
10%
10%
5%
5%
100%
Date
September 25, 2003
October 30, 2003
November 25, 2003
December 11, 2003 (Th.9:45a.m.)
NOTES ON ATTENDANCE AND GRADING

Final exam will be optional. Students are strongly encouraged to take the final comprehensive in
order to improve their grades. The weight of the final exam will be 45 percent and it will replace the
grade of the average of the three partial exams. Students will get the higher of both scores, so
students will not be penalized if they get a lower score by taking the final comprehensive.
Attendance: If you miss a class, 1 point will be deducted from your overall grade. Missing 5 classes will
result in a total loss of your attendance grade points. In order to get the credit for attendance, student
must be on time, not late, and stay for the duration of the class. If you come late or leave earlier, it will be
counted as absent. Every time a student leaves the classroom while the class is in session, one point
from attendance will be deducted. If your cell phone rings while in class, 1 attendance point will be
subtracted.
Late Exams
There will be three partial exams and a final exam (optional) during the course as scheduled on the
syllabus. These exams will test your ability to apply your knowledge of the concepts covered during the
course. If for any reason you are unable to take an exam at the scheduled time, you must clear the
absence in advance with the professor. You must notify the professor at least one week in
advance.
If permission is given to you to take the exam, you may take the exam in advance only, using the following
criteria: absences due to participating in university scheduled activities such as sports, competitions; etc
can take the exam in advance without penalty. Other students will have the exam graded out of 80% of
possible points.
There will be no make-up after the scheduled exams have been taken. If you miss one partial exam for
any personal (serious) reasons and after proper documentation are presented, the partial exam weight will
be added to the final comprehensive. Since you are provided with the exam dates, there is no excuse
for you to allocate personal issues at the same time.
Several announced and pop quizzes will be given throughout the semester. Please note that an absence
on the day of a quiz will result in a quiz grade of zero.
OFFICE HOURS
I will be in my office hours listed on the first page most of the time. If these hours are not convenient with
you, I will be happy to schedule an appointment at a mutually convenient time. I encourage you to come
by whenever you have a question about the course material or any other questions that I may be able to
help you with.
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I am here to help you in anyway possible. Please don’t hesitate to come by my office with any questions
or concerns you may have.
Students enrolled in an institution of higher education are required to self-identify if they would like to
request academic support services on the basis of a disability. LeTourneau University encourages a
student with a disability to self-identify after admission and to provide required documentation to the Dean
of Student Services. Through self-identification and the utilization of appropriate academic services, it is
assumed that academic progress must be made. Students needing facility adjustments must notify the
Dean of Student Services at 903.233.3130.
GRADING SCALE
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90 - 100 =
80 - 89 =
70 - 79 =
60 - 69 =
Below 59 =
A
B
C
D
F
GROUPS, PRESENTATIONS, AND WORK OVERLOAD
In order to encourage team participation, and to work in the portfolio management project, cases,
homework, and projects teams of up to 2 students may be formed. Groups of more than 2 students will
not be allowed as the marginal return for participation per student diminishes with larger groups. These
groups will be created at the beginning of the semester. Members of the group will get the same grade for
the work they do. At the end of the semester, each group will have to make a presentation for the financial
analysis the group worked on. Investment is an analytical course which can be better learned by
discussion, and I also encourage groups to study for exams and study guides. I tend to give a lot of work
such as cases, investment games, projects, and study guides to my students, adding quizzes, exams, and
the financial analysis project which involves surveying and collecting data may at times to appear to be a
large load but in the past it has worked very well since students are capable of learn and apply at the
same time, and tend to do very well on the exams and research work.
PORTFOLIO MANAGEMENT AND INDEX
Every student or team of 2 students will create a portfolio of 10 to 20 companies at the beginning of the
semester. The student will create a prospectus of the portfolio indicating the classes of assets invested in
the portfolio. The student will find potential investors which will be interested in investing in his/her
portfolio. The investors will provide information about risk analysis and asset allocation with the investors.
The student or team will provide regular summaries of the portfolio performance. The student will make
analysis of the companies selected in the portfolio, including financial statements, financial ratios,
performance, statistical analysis, and forecast earnings. The portfolio can be changed only three times
during the duration of the semester. It is recommended that the student changes the companies and
classes during after 4 weeks if deemed necessary. The stock market simulation can be used to track the
performance of the different companies in the portfolio. The student will create an index of the portfolio
and will compare its performance with other market indexes. This index should be managed continuously
to represent the changes in the portfolio.
The student or team will be present the complete portfolio history and index in the last week of class.
Including all relevant information such as company analysis, performance, ratios, financial statements,
investor profiles, risk analysis of the portfolio and of the investors, graphs, tables, etc. The instructor may
ask the student to present their portfolio at different times during the semester.
The students are expected develop their projects following the calendar below. Notice that although
groups have to return their work in a given date, grades will not be assigned to the partial work, but points
can be subtracted from those projects that do not turn their work in the specified date. The objective of
following a calendar is that students can work in this project during the whole semester and do not wait
until the end of semester to work on it.
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INVESTMENT SIMULATION GAME
We will be playing an investment simulation game, called STOCK-TRAK, for the entire semester. More
than 40,000 students and 700 finance professors use this simulation game every year. Every student is
going to manage an account using several stocks. The initial investment amount will be of $500,000 which
can be invested. Each student will play at least once a week by investing in different chosen stocks. The
trading period will begin on September 10, 2003 and end on December 01, 2003. I will provide more
details in class.
TENTATIVE SCHEDULE AND RESPONSIBILITIES
Students are responsible for any extra assignment or announcement given in class. I may also cover
some chapters faster than others to accommodate the student’s need. I am also expecting to use other
books to cover the portfolio and financial analysis sections. The schedule presented below is tentative.
Tentative Course Outline
SECTION ONE: ELEMENTS OF INVESTMENTS
1. Investments: Background and Issues. Chapter 1
2. Review of Business Statistics
3. Financial Markets and Instruments: Chapter 2
4. How Securities Are Traded: Chapter 3
5. Mutual Funds and Other Investment Companies. Chapter 4
SECTION FOUR: SECURITY ANALYSIS
6. Macroeconomics and Industry Analysis: Chapter 12
7. Equity Valuation: Chapter 13
8. Financial Statement Analysis: Chapter 14
SECTION TWO: PORTFOLIO THEORY
9. Risk and Return: Past and Prologue: Chapter 6
10. Efficient Diversification: Chapter 7
11. Capital Asset Pricing and Arbitrage Pricing Theory: Chapter 8
PART THREE: FIXED-INCOME SECURITIES
12. Bond Prices and Yields: Chapter 10.
13. Managing Fixed-Income Investments: Chapter 11.
PART FIVE: DERIVATIVE ASSETS: OPTIONS AND FUTURES (Tentative)
14. Options Markets: Chapter 16
15. Options Valuation: Chapter 17
Portfolio Schedule
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September 8, 2003 :
September 14, 2003:
September 22, 2003
October 9, 2003:
October 23,2003
December 01, 2003.
December 2 and 4 2003
Create groups and provide names of students for each group.
Choose companies for portfolio and create prospectus
Create Index and class assets
Provide first report: ratios, performance, etc (class discussion).
Provide report about investors, risk analysis, etc.
Provide complete final paper, send by email before midnight
Paper Presentations.
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