Instructor: Donald W. Swanton
Contact Information: office Wabash 1112Z, telephone (312) 281-3278, fax (312) 281-3290, email firstname.lastname@example.org, web site http://sites.roosevelt.edu/dswanton/. My web site has information about office hours etc. Google “Swanton Roosevelt” to find me most easily.
Time: Tuesday-Thursday 12:30-1:45
Text: There is no required text. I will be handing out my Notes on Investments (S) in class as the semester progresses. Recommended are The Psychology of Investing 4th ed. By John R . Nofsinger Prentice Hall ISBN-13: 978-0-13-611703-2 and especially A Random Walk Down Wall Street 11th ed. 2015 by Burton Malkiel (M). Get this one cheap in whatever format from Amazon.com. The Kindle version is fine. It’s a good read, and we will be discussing it and looking at some of the graphs.
Prerequisites: ECON 101-102, MATH 116 or 121, ENG 101-102, ECON 234 or MATH 217, and FIN 311.
Goals: In this course students look at long-term investment situations, such as retirement planning, and we use the theoretical tools of modern finance to explore the trade-offs between risk and return.
Homework: I will assign homework each week due the next Tuesday. Much of Tuesday will be spent discussing the problems as assigned and then augmenting them. I will collect but not grade homework assignments, but that does not mean that you can afford to not at least try them before Tuesday. The problems will come back in modified form in the quizzes. Finance is not a spectator sport.
Student Learning Objectives: business discipline principles, quantitative techniques.
Grades: Grades will be determined by an equally weighted average of the best three out of the four quiz grades and the retirement planning project. Quizzes and the project will receive the numerical version of letter grades, A = 4.00, A/B = 3.50, B = 3.00 B/C = 2.50, etc. I will send out sample quizzes the week before each quiz.
Attendance: I do not always take attendance, but I may sample the class on Tuesdays. See the homework point.
Plagiarism: Please review Roosevelt’s policy on plagiarism. www.roosevelt.edu/plagiarism.
Religious Holidays: Roosevelt’s policy is to accommodate students who will be celebrating religious holidays. Talk to me in the first couple of weeks, and we will work something out.
Notes: My Notes on Investments currently consist of:
S1 Risk and Return
S2 Real and Nominal Returns
S3 Retirement Planning
S4 Efficient Markets
S5 Event Studies
S6 The Two Fund Separation Theorem
S7 Bond Risk and its Measurement: Duration
S8 The Term Structure of Interest Rates
S9 Interest Rates and Bond Prices
S10 The Theory of Interest
The following schedule is tentative. We may get ahead of it at some points and will probably fall behind at others. Revised schedules will always be on my web page.
As of July 2, 2015
Date Notes Topics
Aug 25 S1, S9 Introduction, risk and return, interest rates and bond prices
That is correct. We will begin two weeks BEFORE Labor Day September 7.
Sep 1 S2 Real and Nominal Returns
Sep 8 S2, S3 Real and nominal again, retirement planning
Sep 15 S4, M14 Retirement planning and life cycle investing
Sep 22* M1-7, S4 Efficient markets, technical and fundamental analysis
Sep 29 M8, M9 Modern Portfolio Theory intuitively
Oct 6 /// Review of probability and statistics, correlation
Oct 13* S6 The Capital Asset Pricing Model
Oct 20 S6, M10-11 More, the birth and death (?) of beta
Oct 27 S6, S5 More, event studies
Nov 3* S4, S6 Recap, including human capital
Nov 10 S8-10 Interest rates and bonds
Nov 17 S10 The theory of interest
Nov 24 //// Thanksgiving Vacation
Dec 1 S8, S9 Bond risk and its measurement: duration
Projects Due December 1, 2015
Dec 8* //// Last Quiz
The asterisk * denotes a quiz on the Thursday of that week, including the last quiz during final exam week.
THE RETIREMENT PROJECT
You are a financial planner. You have clients who are just beginning to think about planning for retirement. They are both thirty five years old and have $80,000 in a company retirement plan which they can roll over into their own plan. They want to retire at 67 but are wondering what effect retiring a year or two earlier or later will have on their retirement. Their combined income is $100,000 per year, and they want to finance the same income in retirement in real terms. When they retire they can purchase a two-life annuity with an expected second death at age 87. They need retirement and portfolio planning.
They have not taken any finance courses, and their last mathematics course was many years ago. They will not understand equations, formulas, or finance jargon. Large tables will make their eyes glaze over. Charts and graphs may be helpful. You must explain your recommendations to them in simple, ordinary language. Prepare a plan with some alternative rates of return and retirement dates and explain what annual contributions they must make to the plan to make their retirement what they want. Talk in depth about the trade-off between risk and high expected return. Suggest some mutual fund portfolios for them. Make your own assumptions about social security by the time they retire.
Alternative Retirement Project
Use yourself as the client, with your own present situation. This client differs from the real you, because he/she has not taken any finance courses and does not know any more than the clients in the First Choice project.
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