College of Business Administration
San Diego State University, Fall 2013
Finance 327: Investments
Instructor:
Phone:
Fax:
e-mail:
S.G. Badrinath
594-4749
.
594-3272
sbadrina@mail.sdsu.edu
Office: 3371 (SS East)
Hours: T: 12:00 PM – 1:30 PM,
or by appointment
Class: T-Th 2:00-3:15PM, GMCS 310
Course Objectives:
1. To advance the understanding of fundamental concepts of finance, financial markets
and market participants.
2. To explain the structure of publicly traded financial assets and the global markets in
which they trade.
3. To evaluate the economic and industry environment in which companies operate and to
develop and employ tools of financial analysis for examining company fundamentals
4. To understand the techniques of for valuing financial instruments.
5. To link theories of valuation to practical aspects of investing and portfolio management.
Program Goals and Student Learning Outcomes:
BSBA students will graduate being effective communicators and critical thinkers. They
will be knowledgeable about the essentials of business, global in their perspective and
display an ability to analyze ethical problems. Finance 327 contributes to those goals
through the following student learning outcomes. During this semester, you will become
familiar with the general structure of domestic and international financial markets and
some of the securities traded therein. We will critically examine qualitative concepts such
as market efficiency, intrinsic value and risk. These tools should enable you to build
valuation models for common stocks and fixed-income securities.
You will also learn how professional financial analysts should evaluate companies and how
investment managers build diversified portfolios and assess portfolio performance. The course
concludes with some discussion of financial derivatives.
For whom the course is intended:
Students seeking eventual employment with a brokerage company, investment company
or financial services company with responsibilities in evaluating and selecting equity and
fixed-income securities for investment portfolios.
Text and Readings:
Text: Z. Bodie, A. Kane and A. Marcus, Essentials of Investments, latest Edition, McGraw Hill.
Use the online learning center at www.mhhe.com for your textbook. It has a number of practice
quizzes for each chapter which you can use to improve your understanding of the material.
A current subscription to an investment periodical such as Barrons, or the Wall Street Journal is
strongly recommended. Learn to use your financial calculator early in the course.
Online Course Materials.
a) Lecture notes appear on my website at http://ramurapt.wordpress.com. These are updated
regularly, so please check the dates adjacent to them before downloading files. In addition, to
course materials, the website contains data sources, links and a host of supplementary materials
that pertain to current and past events in financial markets. As you will find out, I teach the course
in “real time” and I urge you to use this site extensively.
b) You may be aware of the Wells Fargo Financial Markets Laboratory on campus. It has 11
Bloomberg terminals with real-time data and analysis pertaining to financial markets. I will be
using these resources extensively and expect you to become familiar with that capability.
c) You should automatically be enrolled as a blackboard user for Finance 327 when you register
for the course. Please be sure to update your current e-mail address on blackboard as this is
how you will be able to access your grades. Except for grades, I will not use blackboard.
What you should already know:
Statistical concepts: Expected Returns, standard deviation, correlation, regression.
Financial concepts: time value of money, CAPM, systematic and unsystematic risk,
discounted cash flow analysis, NPV and IRR, nominal and real interest rates.
Course Policies and Practices:
The pedagogy involves lectures and class discussion. Please be aware that relevant business
experience does not generally provide a substitute for the analytical basis that pre-requisites to
this course normally provide.




Expect to spend about two class periods of time in outside preparation for each class period.
Focus in particular on chapter concept checks in the textbook. Solutions to these appear at
the end of the textbook. Attempt the suggested end-of-chapter problems.
During class, I will spend more time on problems and concepts that require further elaboration
and may not discuss all the topics explicitly. As the semester evolves, relevant topics of
current interest may be discussed even if they are outside the textbook.
Please come prepared to participate actively in the classroom. At times, there has been
substantial variation in the backgrounds of students enrolling in this course. Do not let this
keep you silent. Offer comments or ask questions before, after or during class, in person or via
e-mail. There will be a cohort of students who will be thankful that you spoke up.
Grading Policies
Grading for this course consists of two exams (30% each) and a final (30%). The final is
comprehensive. 10% of your grade is for becoming Bloomberg ready.
 I do not give make-ups unless I am informed of an emergency prior to the date of the exam.


Incompletes will be considered only if the student has participated in a significant portion of
the course and an unforeseen emergency prevents completion.
Undergraduate grades shall be: A, outstanding achievement; B, praiseworthy performance;
C satisfactory performance; D, minimally passing and F, failing. The grade for average
undergraduate achievement shall be C. Academic dishonesty is at least an automatic F. Plus
and minus grades (A- through D-) will also be assigned at the end of the course.
Weekly Schedule (Tuesday Week)
August 27
September 3
Introduction to Investments and Markets Chapter 1
Lecture Notes - 1
The Investment Environment
Chapters 4.1-4.3, 5
Lecture Notes - 1
Investments, investors, markets
Problems 1: 1-7.
September 10 Risk and return concepts
Measuring returns and risk
September 17 Instruments and Markets
Lecture Notes – 1,
Chapter 5, 7.1
Problems 5: 5-7a CFA1,2,7-9
Chapters 2, 3, Lecture Notes 2
Types of financial instruments, indexes Problems 2:1-4,6,11-15,17-18
Primary and secondary markets
September 24 Market operations
October 1
Chapter 3, Lecture Notes - 2
Short selling, order types
Problems 3:1-6,10-13,15,16,23
Market structure and operations
Chapter 3
October 8 TUESDAY: First Mid-Term Exam
THU: Macro-analysis
Discount models and
Relative value models
Chapters 12, 13, Notes - 3
Problems 12: 1-4
Problems 13:1-3,5-712,18-19
October 15 Macro and Earnings Management
Chapter 12, 13, Notes- 4
Earnings management
October 22 Discounted Cash Flow Valuation
October 29
‘
Technical Analysis
Lecture Notes – 5, 6
Chapter 9, Lecture Notes 6
Technical Indicators: Uses and Abuses
How Efficient are Markets?
November 5
‘
Efficient markets, behavioral finance Chapter 8, Lecture Notes 6
THURSDAY: Second Mid-Term Exam
November 12 Fixed Income Basics
Bond Pricing
November 19 Fixed Income analysis
Price/yield relationships
Term structure of rates
November 26 Option Markets
Chapter 10, Lecture Notes - 7
Problems 10: 5-12, 15-19,26
Chapters 11.1-11.2,
Lecture Notes - 7
Problems 10:33-36,38-40
Chapter 15.1-15.3
Lecture Notes - 8
Option markets, speculation, hedging and
pricing
December 3
Futures Markets
Problems 15:1,6,7ab.
Chapter 16, Lecture Notes - 9
December 10: TUESDAY: REVIEW FOR FINAL
FINAL EXAMINATION: Tuesday, December 17, 1:00 – 3:00 PM