Finance 3233 Money and Banking Summer 2002 TABLE OF CONTENTS I. General Information...1 II. Academic Integrity Policies...4 III. Class Preparation...5 IV. Examinations and Grading...8 V. Class Schedule...9 Reserve Listing/Library Assignments...11
1 TERM: Spring 2002... COURSE NUMBER: FIN 3233 COURSE TITLE: C0REQUISITES: Money and Banking Co-requisites: Fin 3403 with a C or better; Prerequisites: ACG 2071, STA 2023 with a C or better CATALOG DESCRIPTION: This course examines the structure and operations of our monetary system, commercial banking, central banking, money and capital markets, and provides an introduction to monetary theory and policy. INSTRUCTOR: Dr. Cheryl Frohlich OFFICE: 42/3210 OFFICE HOURS: Dr. Frohlich (42/3210): cfrohlic@unf.edu M W 4:00-5:30 and by appointment. PHONE: CLASS TIME: 620-2630 (office); 223-7249 (home) Email: cfrohlic@unf.edu Fax: (904) 928-3861 Fin 3233 Section 008 M/W 8:00pm-9:40pm Bldg 42/ 1113 REQUIRED TEXT: Ritter, Silber and Udell, Principles of Money, Banking & Financial Markets 10 th edition DROP DATE: Thursday June 27, 2002 Memorial Day: Monday May 27, 2002 FINAL EXAM: FIN 3233_008 Wednesday at 8:00 pm-9:40pm July 31, 2002 WHY TAKE FINANCE? Finance is the language of business. Understanding finance is essential for all business students whether the intended major is management, marketing, law, or accounting. A finance background provides a graduate with fundamental training that can be used in all aspects of organizational activity, whether commercial,
governmental, or institutional. 2
3 THIS COURSE INTENDS TO: Finance 3233 examines the financial sector of the U. S. economy. In particular we will discuss the financial markets, interest rates and their determination, monetary theory and policies, an overview of financial institutions, and international financial institutions and their markets. 1. Objective: The objective of this class is to provide the student the opportunity to stretch to his/her full thinking potential. The course is very rigorous and the student must integrate concepts in lecture and test. A working knowledge of Federal Reserve function and interest rate theory will be expected at the conclusion of the course. In addition, general information on the various markets such as the bond, stock, future, option and foreign exchange markets along with financial institutions' asset/liability structure, risk structure, competitors, and general makeup will also be expected. 2. Lecture-Discussion: Most of the class periods will be devoted to covering material from the textbook or assigned readings. Class participation through discussion, questions, examples, or newspaper articles is required. I will expect each of you to remain abreast of current developments in financial markets and financial institutions in general. In order to accomplish this the Wall Street Journal along with certain weekly publications such as Business Week, Newsweek, or Forbes need to be read on a regular basis. WRITTEN COMMUNICATION REQUIREMENT: Two copies of the rough draft of your paper(s) will be due on the first due date. If the rough drafts are not submitted on the appointed dates (June 24, and July 3rd respectively) the student will lose 10% of the possible points for the paper. The paper(s) will be given to fellow students to read and critique. The critiqued papers will be due the following class period (June 26 th and July 8 th respectively). If the critiqued papers are not returned on the appointed dates by the critiquing student, then 10% of the possible points on the critiquing students paper will be lost. 1. INTEREST RATE FORECAST PROJECT: Due Date: June 24----Final Paper Due July 1 Read Ritter, Silber and Udell Chapter 30 The following economic indices must be followed throughout the semester: the GDP, CPI, unemployment rate, housing starts, and the balance of trade. These are monthly updated with the exception of the GDP, which is updated quarterly. You will collect twelve data points prior to the start of the semester on these indices and then continue to collect the current data for the semester. The market (NYSE, Dow, etc.), short-term interest rates (CD or Treasury Bill), long-term interest rates (30-year mortgage or 30 year T-Bonds), crude oil prices, and money balances. These indices must be tracked at least weekly. Periodically, the indices will be collected to ensure that students are tracking the indices. A short analysis of an indice may also be collected during the semester. A one-page paper on how the indices related to the direction of interest rates observed during the observation period with a summary paragraph forecasting the movement of rates in the near future based upon the observed movement of the indices will be collected on the date indicated above. The paper will be graded on compliance to the requirements of the project and on writing and grammar.
In addition, tests may include short essay questions on the project. 4
5 2. PORTFOLIO PROJECT: Due Date: July 3rd ---Final Paper July 10 th Each student will receive an imaginary $100,000. They will be required to create a portfolio consisting of a least 3 stocks (one must be preferred one must be purchased on the NYSE and one on the NASDAQ), 2 bonds (one corporate and one government or municipal), 2 puts, 2 calls, 3 mutual funds (one bond, one stock, and one international), and 1 future contract. The initial purchases must be made in the week of May 13 th. The securities bought during this period must be held for one week. After the initial week of holding, the students may buy and sell securities but the mix of markets must be maintained. The student must have at least 15 trades. The appendix must include the spreadsheet in which the securities were tracked. The calculation for the portfolio's return including dividends paid and accrued interest on the bonds will be shown. Periodically, the spreadsheet will be collected to ensure that students are tracking the securities and buying securities when required. Failure to either track or purchase timely will have a negative impact upon the grade of the assignment. At the end of the period, the student will write a two-page paper on the Trials and Tribulations of playing the market. What strategies did you use to choose the securities in your portfolio? What differences between the various markets did you notice? How did interest rate and economic changes affect your securities? Writing skills will be graded. There must be an introduction, body, and conclusion. The paragraphs must flow together. One cannot jump from one topic to another without a lead-in. Spelling and sentence structure will be graded. In addition, the correct calculation of gain/losses, calculation of the holding period return, and the annualized return will be part of the final grade. In addition, tests may include short essay questions on the project. ORAL COMMUNICATION REQUIREMENT: Oral communication skills will be demonstrated through class participation. In addition, discussion of homework when presented in class will be required. COMPUTER APPLICATIONS: Several spreadsheet software packages are available. Use of one of these packages will be required to complete some homework assignments. INTERNATIONAL COVERAGE: One section on Foreign Exchange Markets, in addition to international applications and issues throughout the text. ENVIRONMENTAL ISSUES COVERED: None ETHICAL ISSUES COVERED: Ethics will be discussed as it pertains to the use of finance in managerial decisions and its impact upon the organization.
6 ACADEMIC INTEGRITY POLICIES ETHICS AND CODE OF CONDUCT In today's environment, ethics has become an extremely important topic. These characteristics are not bestowed upon you at graduation but are developed over time. The College of Business Administration has published an undergraduate handbook that includes a Code of Conduct (Pages 2-3). All items listed will be strictly enforced. Any student violating any aspect of the code of conduct will be penalized and receive a grade of `F' for the course and referred to the proper authorities for expulsion from the University. Specific items that relate directly to this course are: Cheating Intentionally using or attempting to use unauthorized materials, information, notes, study aids or other devises in any academic exercise. This definition includes unauthorized communication of information during an academic exercise. This includes, but is not limited to the following: (1) Computer assignments must be done independently. (2) Copying or allowing copying by another student or students constitutes cheating. Multiple Submissions The submission of substantial portions of the same academic work for credit more than once without authorization. (1) Computer assignments must be done independently. Abuse of Academic Materials Intentionally or knowingly destroying, stealing, or making inaccessible library or other academic resources such as: (1) Solution manuals. (2) Instructor's overheads. Complicity in Academic Dishonesty Intentionally or knowingly helping or attempting to help another to commit an act of academic dishonesty (1) Providing answer(s) to a later class. (2) Asking other student(s) or class(es) for answer(s). DISABILITY ACT: If you have a disability, as defined by the American with Disability Act (ADA), which requires a classroom accommodation or auxiliary aid(s), please inform me of your needs during the first week of class so that I may take appropriate action. Individuals who require reasonable accommodations must contact the Office of Disabled Services Programs at Founders Hall, Building 2, Room 2120, 904-620-2769 as soon as possible.
7 CLASSROOM PROTOCOL Success in business requires much more than adequate technical training. Some of the factors that you should have developed by now include: (1) dependability (e.g., attend class regularly) (2) punctuality (e.g., class starts on time) (3) courtesy (e.g., pay attention, don't pack up early) (4) motivation (e.g., be adequately prepared for class) POLICY ON LATE WITHDRAWALS The University policy for dropping a course after the published drop date, is as follows: UNF students are not allowed to drop a course after the official withdrawal date unless there are unusual circumstances that are clearly beyond the student's control. When such cases exist, the student should file a petition with attached documentation. The instructor does not approve or disapprove, but assigns a grade of WP or WF. The instructor may also recommend an action to be taken or write a note explaining unusual circumstances connected with the course. This policy means that students do not have the right to drop a course after the official university deadline simply because they have a passing grade at that time. CLASS PREPARATION Homework and attendance are essential parts of the learning process. It is the student's responsibility to have read the assigned chapter(s) before coming to class. Assignments should be prepared and are due on the dates indicated on the schedule unless otherwise instructed. You should spend at least ten to fifteen hours per week outside of class on assignments. ATTENDANCE/PARTICIPATION Even though no roll will be called, attendance is important in achieving good grades. Students are responsible for thorough preparation of all chapters. Students may be called upon randomly to answer and help present problems. QUIZZES/ HOMEWORK There will be at least five homework assignments or quizzes. Each is worth 15 points. No make-up homework will be given. When possible there will be a two-class turnaround time on homework. Late homework will not be accepted. Late is defined as the day I return the homework in class. There will be quizzes (also 15 points each) throughout the semester. Absolutely no makeup quizzes will be given. If you must be out of town, you will need to coordinate taking the quiz prior to your departure. The highest 5 grades out of the homework /quizzes will be counted.
INTEREST RATE FORECAST PROJECT: Due Date: June 24----Final Paper Due July 1 Read Ritter, Silber and Udell Chapter 30 8 The following economic indices must be followed throughout the semester: the GDP, CPI, unemployment rate, housing starts, and the balance of trade. These are monthly updated with the exception of the GDP, which is updated quarterly. You will collect twelve data points prior to the start of the semester on these indices and then continue to collect the current data for the semester. The market (NYSE, Dow, etc.), short-term interest rates (CD or Treasury Bill), long-term interest rates (30-year mortgage or 30 year T-Bonds), crude oil prices, and money balances. These indices must be tracked at least weekly. Periodically, the indices will be collected to ensure that students are tracking the indices. A short analysis of an indice may also be collected during the semester. A one-page paper on how the indices related to the direction of interest rates observed during the observation period with a summary paragraph forecasting the movement of rates in the near future based upon the observed movement of the indices will be collected on the date indicated above. The paper will be graded on compliance to the requirements of the project and on writing and grammar. In addition, tests may include short essay questions on the project. *Two copies of the rough draft of your paper(s) will be due on the first due date. If the rough drafts are not submitted on the appointed dates (June 24 th ) the student will lose 10% of the possible points for the paper. The paper(s) will be given to fellow students to read and critique. The critiqued papers will be due the following class period (June 26 th ). If the critiqued papers are not returned on the appointed dates by the critiquing student-10% of the possible points on the critiquing students paper will be lost. Total project counts 20 points.
9 PORTFOLIO PROJECT: Due Date: July 3rd ---Final Paper July 10 th Each student will receive an imaginary $100,000. They will be required to create a portfolio consisting of a least 3 stocks (one must be preferred one must be purchased on the NYSE and one on the NASDAQ), 2 bonds (one corporate and one government or municipal), 2 puts, 2 calls, 3 mutual funds (one bond, one stock, and one international), and 1 future contract. The initial purchases must be made in the week of May 13 th. The securities bought during this period must be held for one week. After the initial week of holding, the students may buy and sell securities but the mix of markets must be maintained. The student must have at least 15 trades. The appendix must include the spreadsheet in which the securities were tracked. The calculation for the portfolio's return including dividends paid and accrued interest on the bonds will be shown. Periodically, the spreadsheet will be collected to ensure that students are tracking the securities and buying securities when required. Failure to either track or purchase timely will have a negative impact upon the grade of the assignment. At the end of the period, the student will write a two-page paper on the Trials and Tribulations of playing the market. What strategies did you use to choose the securities in your portfolio? What differences between the various markets did you notice? How did interest rate and economic changes affect your securities? Writing skills will be graded. There must be an introduction, body, and conclusion. The paragraphs must flow together. One cannot jump from one topic to another without a lead-in. Spelling and sentence structure will be graded. In addition, the correct calculation of gain/losses, calculation of the holding period return, and the annualized return will be part of the final grade. In addition, tests may include short essay questions on the project. *Two copies of the rough draft of your paper(s) will be due on the first due date. If the rough drafts are not submitted on the appointed dates (July 3 rd ) the student will lose 10% of the possible points for the paper. The paper(s) will be given to fellow students to read and critique. The critiqued papers will be due the following class period (July 8 th ). If the critiqued papers are not returned on the appointed dates by the critiquing student-10% of the possible points on the critiquing students paper will be lost. Total project counts 20 points.
10 EXAMINATIONS: There will be midterm and a final. The final may be comprehensive. As a general policy NO Make-Up's are given. There is every possibility that if you should miss a test, you will receive a zero on that test. All exams are to remain in control of the professor. FAILURE TO RETURN AN EXAM RESULTS IN AN AUTOMATIC ZERO FOR THAT TEST. GRADING: Grading schedule is subject to change given class progress. Notification will be provided prior to change. Grading is on a numerical average not on the effort involved. Students are responsible and accountable for checking the accuracy of all their scores and notifying the instructor for adjustments. Proper documentation (ie. A quiz with an improperly recorded grade for example) must be provided in order for a grade change to be made. Individual Homework/Quizzes (5) 21.2% 75 Indice/Interest Rate Project* 05.6% 20 Portfolio Project* 05.6% 20 Midterm 33.8% 120 Final 33.8% 120 100% 355 * Two copies of the rough draft of your paper(s) will be due on the first due date. If the rough drafts are not submitted on the appointed dates (June 24 th and July 3 rd respectively) the student will lose 10% of the possible points for the paper. The paper(s) will be given to fellow students to read and critique. The critiqued papers will be due the following class period (June 26 th and July 8 th respectively). If the critiqued papers are not returned on the appointed dates by the critiquing student, then 10% of the possible points on the critiquing students paper will be lost. Grade Percentage Points A 90-100% 319.5 B 80-89% 284 C 70-79% 248.5 D 60-69% 213 F 0-59% A student must have earned at least 90% of the total possible course points (maximum 355) to obtain an 'A' for the course. Similar requirements for letter grades, B, C, and D are indicated on the schedule above. Although, quite often the final grades are curved, this is not a certainty. Therefore, the most conservative approach will be to use the above percentages for grading during the semester. The + and grades may be used at the discretion of the instructor.
Content Schedule Introduction Chapter 1 Introducing Money, Banking, and Financial Markets (on own) Chapter 2 The Role of Money in the Macroeconomy (on own) Chapter 30 Tying It All Together (On Own Necessary for Insight to Indice Project) 11 Financial Markets Chapter 3 Financial Instruments, Markets, and Institutions Interest Rates: Chapter 4 Interest Rate Measurement and Behavior Chapter 5 The Risk and Term Structure of Interest Rates Federal Reserve: Class Notes Economic Goals Chapter 18 Who s in Charge? Chapter 19 Bank Reserves and the Money Supply Chapter 20 The Instruments of Central Banking Chapter 21 Understanding Movements in Bank Reserves Chapter 22 Monetary Policy Strategy Monetary Theories and Policies: Chapter 23 The Classical Foundations Chapter 24 The Keynesian Framework Chapter 25 The ISLM World TEST Chapter 26 Money and Economic Stability in the ISLM World Chapter 27 An Aggregate Supply and Demand Perspective on Money and Economic Stability Chapter 28
Rational Expectations Chapter 29 Empirical Evidence 12
13 Markets Chapter 6 The Structure and Performance of Securities Markets Financial Instruments Chapter 7 The Pricing of Risky Financial Assets Chapter 8 Money and Capital Markets Chapter 9 Demystifying Derivatives: Futures/ Options/ Swaps Chapter 10 Understanding Foreign Exchange Banks and Other Intermediaries Chapter 11 The Nature of Financial Intermediation Chapter 12 Depository Financial Institutions Chapter 13 Nondepository Financial Institutions Chapter 14 Understanding Financial Contracts TEST
LIBRARY ASSIGNMENTS/ RESERVE LISTING 14 University of North Florida Library Reserve Collection TITLE AUTHOR Readings for Financial Institutions Fraser & Rose (F&R) [ 7269] 4th Edition Keys for Business Forecasting Fed. Reserve [3420] Principles for Money and Banking Silber, et al [2555] CBOT Financial Instruments Guide CBOT [ 1911] Strategies for Buying and Writing Options on T-Bond Futures CBOT [ 1907] Understanding Basis: The Economics of Where and When CBOT [1910] Stock Bond Options (CDROM)-Powerpoint Frohlich [9000] U.S. Financial Systems: Kaufman [553]