Department of Finance
National Chengchi University
Fall 2013
Instructor: 徐燕山
Essentials of Investments
Office: 商館 261246
Thursday: 09:10 - 12:00
Room: 研究 250419
Office hours: Wed 14 - 16
E-mail: ysshiu@nccu.edu.tw
Phone: 81246
Course Description:
The course covers the elements of financial markets, financial securities and how they
are valued and traded. The perspective is that of the investment manager, responsible
for the investment portfolios of financial institutions, such as insurance companies,
banks, pension funds, mutual funds, endowment funds, and personal trusts. We
discuss several outstanding problems of investment management, including the
definition of criteria of decision making under uncertainty, security valuation,
performance measurement, the asset mix decisions, and alternative risk control
procedures.
Required and Recommended Materials:
The textbook for the course is:
Bodie, Kane and Marcus (BKM), Essentials of Investments, 9th edition, McGraw-Hill/
Irwin, 2013. (華泰書局代理進口)
Other Readings:
Other required readings will be distributed to the class. To keep updated, regular
reading of the financial press: The Wall Street Journal and The Financial Times, is
highly recommended.
Lecture Notes
Course material which includes Power Point slides of the lectures, assignment and
solutions, and other material will be posted on the University’s e-learning website
(WM3).
Prerequisites
Economic Principles, Principles of Financial Accountings, Statistics for Business and
Basic Calculus.
Course Requirements
The course requirements consist of a final exam and three group projects and one
individual project. The final exam is comprehensive, in-class, with problems probably
from the projects we have discussed in classes.
For the group (or individual) projects, groups should consist of no more than 3
students. Each group (or individual) will be responsible for preparing the three
projects (or one individual project), writing a short analysis and presenting their
findings. Write-ups should be limited to three pages, plus appendices with spreadsheet
printouts, etc.
All the project reports must be sent to my e-mail account, ysshiu@nccu.edu.tw,
before/at the midnight (pm 12:00) preceding the due date (i.e., a class meeting
day). If you send in your report within three hours late after the due time (i.e.,
the report is sent in between 12:00pm and 3:00am), 20 points will be subtracted
from your grade you get for your project. If there is another three hours delay
(i.e., the report is sent in between 3:00am and 6:00am), an additional 20 points
will be subtracted. If there is another three hours delay (i.e., the report is sent
in between 6:00am and 9:00am), an additional 20 points will be subtracted. If
you still do not send in your report before 9:00am, you will receive NO grade
point on your project. In addition, you must also hand in a hardcopy of your
report at the beginning of the class. If you do not hand in the hardcopy, 10 points
will be subtracted from your grade.
All students will need to have a calculator for this class. It is an advantage to have a
financial calculator, but not a requirement. Every student in investment courses is
expected to be comfortable with EXCEL tools.
This course is challenging and cumulative in nature. For this reason, it is important
not to fall behind, as it is difficult to catch up. Class attendance is mandatory. Students
are expected to arrive to class on time and stay to the end of the class period.
Chronically arriving late or leaving class early will have an impact on a student’s
grade. Unexcused absence from more than two classes will materially affect your
grade. To be qualified for this class, you MUST show up at our first class meeting
on September 26. Any student who fails to show up will be demanded to drop this
course.
Grading policy
The final grade will be determined as follows:
Class participations and presentations
10%
Group and individual projects
50%
Final exam
40%
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Class Schedule
Readings should be done prior to the class week in which the material is discussed.
BKM 1.1: Chapter 1, sec. 1; BKM 2: the whole 2nd chapter.
Week
Topics
Readings
Problems
1
9/26
Overview of class
Financial instruments and
why we need them
BKM 1.1-1.6,
BKM 2
2
10/3
Financial markets: How
securities are traded?
BKM 3.1-3.7
BKM 3.6
3
Time value of money: FV,
Review
Groups’ stock list due this
10/17
PV, annuities, perpetuities
4
10/24
Measures of return,
Statistics review, Risk and
expected returns
BKM 5.1-5.3
BKM 5.1, 5.4,5.5
5
10/31
Portfolio selection with
two risky securities
BKM 6.1-6.2
Excel example:
Portfolio
selection
BKM 6.5,6.6
6
Portfolio selection with
BKM 5.5, 6.3, 6.4 BKM 6.7-10,6.13
11/7
multiple risky securities
Excel example:
Portfolio
optimizer
7
11/14
Capital Asset Pricing
Models
BKM 6.5, 7.1-7.3
BKM7.3,7.15,7.17-18
Group project 1 due next
week
8
11/21
Capital Asset Pricing
Models, continued
BKM7.2-7.3
Excel example:
Beta estimation
BKM 7.8-12
Presentations on project 1
Group project 2 due next
week
9
11/28
Equity valuation
10
12/5
Arbitrage
BKM 13
BKM 13.1,13.3
Presentations on project 3
11
12/12
Fixed income securities
BKM 10.1-10.4
BKM 10.2,10.4,10.22
12
Management of interest
BKM 10.6,
BKM 10.30,11.1-4
week
Presentations on project 2
Group project 3 due next
week
3
12/19
rate risk
11.1-11.4
Individual project 1 due
Excel example:
Immunization
next week
13
12/26
Options basics and
strategies
BKM 15.1-15.2
BKM 15.5,15.25,15.26
Presentations on individual
project 1
14
1/2
Option pricing
BKM 16.1-16.4
Excel example:
Binomial model
BKM 16.7,16.27
15
1/9
Market efficiency
Conclusion & Final review
BKM 8
BKM 8.3,8.17,8.20
16
1/16
Final exam
4
Assignment 1:
Investments Student Data Sheet
To be returned by October 3, 2013.
Name
Student ID #
Major
Minor
Email address
Reasons for taking this course:
Please include below a small photo of yourself.
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