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FINC 340
SEATTLE UNIVERSITY
ALBERS SCHOOL OF ECONOMICS & FINANCE
BUSINESS FINANCE
Instructor: Ken Shah, Ph.D.
Email: kshah@seattleu.edu
Class Web Page: http://fac-staff.seattleu.edu/kshah/
Spring 2007
Office: 402 Pigott
Office Hours: 12–1:00pm TTh
Phone: 296-2805
OVERVIEW
Welcome to the introductory course in finance. The class is designed for business students
including those who continue on as finance majors as well as other students with business
interest. The objective of the course is to provide you with a conceptual framework necessary to
appreciate and understand the financial decisions made by corporate managers. I also hope to
stimulate your interest in finance as well as help you develop the skills necessary to solve
rudimentary financial problems. You can expect the course to be challenging and you should
prepare for and attend each class session. The class requires basic mathematical and statistical
skills that you should have picked up in your prerequisites.
In this class, you will develop skills required to make sound financial decisions using the concepts
of net present value and learn how to account for risk. We will also address one of the most
important questions facing corporate managers: what investments should a firm undertake? The
skills developed are employed in personal financial decision making as well. You will appreciate
the subtleties of mortgage finance, auto lease vs. buy decisions, comparing interest rates offered
by banks and much, much more! Readings, lectures and homework assignments will focus on the
basic tools used by financial analysts and corporate decision makers. Be forewarned, this class
(and the finance discipline) is very quantitative. My job will be to make all these numbers that you
will be working with meaningful. Have fun!
PREREQUISITES
ECON 271, ACCT 230, and junior standing
Basic algebra and statistics
Familiarity with Excel spreadsheet
TEXTS - OPTIONAL
1. Ross, Westerfield and Jordan (RJW), Fundamentals of Corporate Finance
Note: My posted lecture notes are derived from this text book. Purchasing the text is optional.
SUPPLEMENTARY READING
1. Ross, Westerfield and Jordan, Student Problem Manual. This is helpful in sharpening
problem solving skills. The only way you will master the material in this course is to solve
LOTS of problems! Remember, exams are primarily problem solving.
2. The Wall Street Journal. An indispensable daily reading for any finance professional. Groups
will present articles from the Journal; however I do not insist that you subscribe to it as long as
you have daily access to the Journal in library.
WEB ACCESS
I will present the class lectures using PowerPoint presentation software. All of the slides are
available in two ways: You can access the class web page:
http://fac-staff.seattleu.edu/kshah/
FIN 340 Ken Shah Page 2
or you can have the printout of the slides. In either case, I strongly advise you to purchase or
make printouts of the slides before you come to class. This will allow you to focus on the material
rather than hurriedly scribbling down the slides themselves. You can pick up the hard copy of
complete packet of my lecture slides at Copy Mart on Madison Ave.
CALCULATOR AND SPREADSHEET REQUIREMENTS:
The use of a financial calculator which can compute present and future values of cash flows is
required. Bring calculator to every class. I strongly recommend HP-10B (this is an inexpensive
one that does the job) or HP 17B (a fancier, more expensive one). My recommendation is as
follows: if you are a finance major, you should perhaps invest in the more expensive HP-17B,
else HP-10B will do fine. Please note that I do not know keystrokes of all the financial calculators
available, so I will review only the HP-10B keystrokes in class. Others are okay too, but you will
have to learn the keystrokes differences yourself. You will also be required to use a Excel
spreadsheet on homework. Spreadsheet skills are indispensable for today's financial
professional. Not having and knowing how to use a financial calculator will be a serious setback
during your exams.
CLASS PRESENTATION:
Groups of 3 students each to present and discuss one WSJ article relevant to class each class
period. You may choose from a wide variety of topics in the WSJ as long as they are related to
finance (and not marketing, management etc.) Time limit: 10 minutes. You will be graded as
follows: 20% choice of article, 40% presentation; 40% discussion of extra relevant information
not in the article. When it is your group’s turn to present, you must give me a copy of the article at
least one class in advance. You must prepare and distribute one-page handout summarizing your
presentation and article to other students in class. On the day of your presentation, hand in to me
the article and your summary page clearly labeled with the date and all group member names.
THE STOCK MARKET GAME:
A separate handout describes the stock market game you will play throughout the quarter. This
investment simulation involves extensive use of the Internet and its resources, computer work
involving Excel spreadsheet. This is going to be a fun project, and you will do it in your group.
COURSE EVALUATION & POLICIES:
The breakdown of your final grade in the class will be as follows.
Homework Assignments (3 or 4)
Class presentation
Stock Market Game
Attendance or pop quizzes
Midterm Exams (2)
Final Exam (comprehensive)
Total
150
50
100
50
400
250
1000
Grades: No letter grades will be assigned to exams, project, and quizzes/assignments although I
can certainly give you an idea of how you are faring in the course. I encourage you to meet with
me to assess your progress. An average score for the course will typically result in a grade no
worse than a C+, provided you complete all work and attend all classes. To obtain an A, you must
be in top 10% of the class. To be fair to all, I will not consider factors such as 'improvement over
the semester' or extra-credit assignments on an individual basis.
Exams: Exams are closed book. No crib sheets allowed. Essential formulas will be provided.
Final exam is comprehensive.
Attendance or Quizzes: I will take attendance in the first 5 minutes of every class. If you are
late or leave after any breaks, you will be marked absent for the entire class. In order to provide
FIN 340 Ken Shah Page 3
you with an incentive to read assigned material before coming to class, quizzes can cover
material that is not yet discussed in class but is part of assigned reading for the week.
Homework: You will do homework in pre-assigned groups. I think group work is the best way to
learn. I will assume that each group member has understood and contributed to each problem.
'Divide and conquer' is a poor strategy - it will show up very clearly at exam time. The solution to
homework must be neatly presented for full credit. Sloppy handwriting or presentation will not be
graded. I prefer typewritten solutions. No consultation between groups on homework
assignments.
Policy on late submissions and missed quiz/exam: There will be no make up exams or
quizzes. No exceptions. An unexcused absence from any midterm, barring verifiable medical
emergency, will result in a zero grade. Valid non-emergency reasons must be given in writing and
approved at least 48 hours in advance. In such a case, points for the midterm will be added to the
final. Missed quiz will result in a zero for that quiz. Homework assignments handed in later than 5
minutes after the start of the class will not be accepted and will result in a zero score. You must
take the final exam. No early final exam will be given for travel reasons.
Class attendance & assigned readings: Attendance is mandatory. Please be respectful of
other students and your instructor by not being late to class as it breaks the flow of the lecture.
You are expected to have read the assigned readings prior to class meetings - I will not devote
class time to defining basic terms that are in the reading assignments. There may be handouts,
announcements and material covered which in not in the textbook, and I urge you to make
arrangements to get notes etc. should you miss a class. Also check the class web page for
announcements.
Office Hours Policy: I hope that I get to know you all during the course of the quarter - teaching
and learning is more fun that way! You may of course come in unannounced during my regular
office hours. If these times are unsuitable to you, please make an appointment so that I am not
distracted by my other engagements. Specific questions on homework or lectures may also be
addressed to me via e-mail. I encourage the use of email. Lastly, don’t forget -ask questions in
class! This makes discussion more stimulating and enjoyable.
HONOR CODE – READ CAREFULLY!
By continuing to be enrolled in this course, you agree to abide by the terms outlined in this
syllabus. The course will be fully governed by our honor code, which each one of you has agreed
to abide. For group homework assignments, there should be no consultation between groups.
The only cooperation permitted is between members of the same group who will turn in one
solution. Note again that all exams and quizzes are closed book. No crib sheets of any form are
permitted. The use of any outside source of solutions to home works or any other work you
turn in is expressly forbidden. This includes sources on the web, solutions manuals, previous
answer keys, etc. If in doubt, ask before you use outside material.
Academic dishonesty of any form will be punished according to SU procedures. At a
minimum, you will receive a zero score for the assignment or exam in question.
You must read the syllabus carefully and turn in the attached sheet duly signed by the second
class.
FIN 340 Ken Shah Page 4
COURSE OUTLINE
Week of
Topics and Reading Assignments
3/27
Introduction & Overview of Financial Management
Capital Markets & Securities, Calculating Returns, Stock Market Game
Reading: RWJ: Ch. 1, 7.1, 11.1
Time Value of Money
Future are Present Values
Intro. To Multiple Cash Flows
Reading: RWJ: Ch. 4, 5
Annuities, Compounding
Solving for Interest Rates
Type of Loans - Tricks and skullduggery
Reading: RWJ: Ch 5
Catch Up, Review for Exam
Homework 1 due
Midterm Exam # 1
Introduction to Bonds & Bond Valuation
Yield to Maturity, Bond Valuation, Intro to Valuing Stocks
Reading: RWJ: Ch. 6
Stock Valuation
Intro. to Capital Budgeting (NPV and IRR)
Reading: RWJ: Ch. 7, 8
Homework 2 due
Capital Budgeting continued
Estimating Relevant Cash Flows
Reading: RWJ: Ch. 8, 9
Catch up, Review for Exam
Homework 3 due
Midterm Exam # 2
Estimating Cash Flows
Special Applications in Capital Budgeting
Reading: RWJ: Ch. 9
Risk and Expected Return
Capital Asset Pricing Model (CAPM), WACC
Reading: RWJ: 10, 12
Homework 4 due
4/3
4/10
4/17
4/24
5/1
5/8
5/15
5/22
5/29
Exam Week: Consult Exam Schedule
** The topics of simple statistics – expected value, variance, standard deviation etc. are included
as review material. These topics are covered in pre-requisites to the course, and will not be
discussed in class. You are responsible for its review and coming prepared.
** Homeworks will be given 1 week in advance. The pace of the class determines when they are
due. Some adjustment may be necessary.
*** Feb 19 class cancelled – President’s day. All Monday day classes, those that begin before
4:30p.m. will meet on Friday, February 16th (at the regularly scheduled time and room).
FIN 340 Ken Shah Page 5
FINC 340
Your Name: ______________________________________
(Last)
(First)
Quarter Taken: ___________________________________
I have read and understood the terms outlined in this syllabus including the Honor Code. I agree
to abide by the terms and the Honor Code.
Your Signature: _________________________________
Date: _____________
Please use the space below to inform me of any special concerns,
needs, anticipated absences, etc.
Also, please tell me a bit about yourself – your job, careers
goals, hobbies, etc. so that I can get to know you a bit better.
Thanks!
Please affix photo or a
good print copy of a
photo.
FIN 340 Ken Shah Page 6
Self-Study:
WSJ Quotations
Understand and decipher all columns in quotation pages for: Stocks, Treasury Bonds,
Corporate Bonds, Mutual funds
Web-based research
Using the Internet, find following information
Mutual funds
How are closed-end mutual funds bought and sold?
How are open-end mutual funds bought and sold?
Examine a mutual fund prospectus and understand the information given about: fund
objective, major fund portfolio holdings, past fund performance in returns, and
comparison to its chosen index, items fund expense table
Trading:
How are stocks traded on NYSE? Know different participants/traders on the floor of the
exchange, e.g. brokers, specialists, market makers
How are stocks traded on NASDAQ? Know different participants/traders in the market,
e.g. brokers, dealers, market makers
What is an OTC market?
Brokers and Orders
What are different types of stock brokers? E.g. Full-service, discount, deep-discount,
online brokers
How are orders placed for buying/selling stock using an online broker? Many online
brokers have simulated trading platform
What are the different types of orders that can be placed? E.g. market order, limit order,
short sell, buy long, etc.
What is a margin account? Margin call? Maintenance margin? How can you satisfy a
broker’s margin requirement?
Company information
From finance pages of services like MSN and Yahoo, go to a detailed quote page,
financial statements, analyst recommendations, and financial ratios. Survey the
information given and note down any item that you do not understand.
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