FIN301 Class Web Page, Spring ' 25
Instructor: Maggie Foley
Jacksonville University
The
Syllabus PDF file Risk Tolerance Test (FYI) Term Project Guidelines
Weekly SCHEDULE, LINKS, FILES and Questions
Chapter |
Coverage, HW, Supplements -
Required |
References |
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Chapter 1: Introduction Flow
of funds describes the financial assets flowing from various sectors through financial
intermediaries for the purpose of buying physical or financial assets. *** Household, non-financial business, and our government Financial
institutions facilitate exchanges of funds and financial products. ***
Building blocks of a financial system. Passing and transforming funds and
risks during transactions. ***
Buy and sell, receive and deliver, and create and underwrite financial
products. ***
The transferring of funds and risk is thus created. Capital utilization for
individual and for the whole economy is thus enhanced. Part
1 - Who Wants to Chair the Fed? Quiz 1 Game: https://lewis500.github.io/macro/ The
Federal Reserve (Fed) often faces the challenging dilemma of balancing economic
growth with price stability - commonly
referred to as the trade-off between controlling inflation
and minimizing unemployment. 1. Inflation vs. Unemployment
2. Long-term Stability vs. Short-term Relief
3. Uncertainty and Lag Effects
In
the game, you play as the Fed chair and must make interest rate decisions to
strike this delicate balance while keeping inflation and unemployment within
acceptable ranges. Success depends on how well you manage these competing
goals over time. Factors
to Consider:
1.
Current Inflation Rate:
2.
Unemployment Rate:
3.
Economic Growth:
4.
Consumer and Business
Confidence:
5.
Financial Market
Conditions:
6.
Global Economic Trends:
7.
Lag Effects of Monetary
Policy:
8.
Federal Reserve’s Dual Mandate:
In-Class
Debate: Should the Fed Reduce Interest Rates Soon, or Is It Better to Wait?
The next Federal Open Market Committee (FOMC) meeting is scheduled for January 28–29, 2025. Let’s wait and see what unfolds leading up to this critical decision. Chapter 2 Introduction
of Financial Market 1.
What are the six parts of the financial
markets
Money: ·
To pay for purchases and store wealth
(fiat money, fiat currency) Financial
Instruments: ·
To transfer resources from savers to
investors and to transfer risk to those best equipped to bear it. Financial
Markets: ·
Buy and sell financial instruments ·
Channel funds from savers to investors,
thereby promoting economic efficiency ·
Affect personal wealth and behavior of
business firms. Example? Financial
Institutions. ·
Provide access to financial markets,
collect information & provide services ·
Financial Intermediary: Helps get funds
from savers to investors Central
Banks ·
Monitor financial Institutions and
stabilize the economy Regulatory
Agencies ·
To provide oversight for financial system.
2. What are the five core
principals of finance
No homework for chapters 1, 2 |
The Implications of Trump's Return on U.S.
Trade Policy: Will Tariffs and Trade Wars Resurface? (FYI) Background Trump's
presidency (2017-2021) featured aggressive trade policies, including
significant tariffs on China and other trading partners, renegotiations of
trade agreements, and discussions about protecting American manufacturing
through quotas and tariffs.
Key
Insights
1.
Jobs:
2.
Cost of Living: ·
Prices rise for everyday goods (e.g.,
food, clothes, electronics) when tariffs increase import costs. ·
Higher energy costs can have widespread
effects across industries. 3.
Availability of Goods: ·
Imported goods (e.g., seasonal produce,
luxury cars, and tech gadgets) may become limited or delayed. ·
Domestic alternatives might not match
global competition in terms of quality, price, or innovation. Now,
let’s work on this survey about tariffs. Tariff Survey Game: Tariff Trade Simulation A simple game What Determines the
Strength of the US Dollar? (self-produced video) Swiss franc carry trade
comes fraught with safe-haven rally risk (FYI) By Harry Robertson September 2, 20241:03 AM EDTUpdated 5 months ago LONDON, Sept 2 (Reuters) - As investors turn to the Swiss
franc as an alternative to Japan's yen to fund carry trades, the risk of the
currency staging one of its rapid rallies remains ever present. The Swiss franc has long been used in the popular strategy
where traders borrow currencies with low interest rates then swap them into
others to buy higher-yielding assets. Its appeal has brightened further as the yen's has dimmed. Yen
carry trades imploded in August after the currency rallied hard on weak U.S. economic
data and a surprise Bank of Japan rate hike, helping spark global market
turmoil. The Swiss National Bank (SNB) was the first major central bank
to kick off an easing cycle earlier this year and its key interest rate
stands at 1.25%, allowing investors to borrow francs cheaply to invest
elsewhere. By comparison, interest rates are in a 5.25%-5.50% range in
the United States, 5% in Britain, and 3.75% in the euro zone. "The Swiss franc is back as a funding currency," said
Benjamin Dubois, global head of overlay management at Edmond de Rothschild STABILITY The franc is near its highest in eight months against the
dollar and in nine years against the euro , reflecting its status as a
safe-haven currency and expectations for European and U.S. rate cuts. But investors hope for a gradual decline in the currency's
value that could boost the returns on carry trades. Speculators have held on to a $3.8 billion short position
against the Swiss franc even as they have abruptly moved to a $2 billion long
position on the yen , U.S. Commodity Futures Trading Commission data shows. "There is more two-way risk now in the yen than there has
been for quite some time," said Bank of America senior G10 FX strategist
Kamal Sharma. "The Swiss franc looks the more logical funding currency
of choice." BofA recommends investors buy sterling against the franc ,
arguing the pound can rally due to the large interest rate gap between
Switzerland and Britain, in a call echoed by Goldman Sachs. The SNB appears set to cut rates further in the coming months
as inflation dwindles. That would lower franc borrowing costs and could weigh
on the currency, making it cheaper to pay back for those already borrowing
it. Central bankers also appear reluctant to see the currency
strengthen further, partly because of the pain it can cause exporters. BofA
and Goldman Sachs say they believe the SNB stepped in to weaken the currency
in August. "The SNB will likely guard against currency appreciation
through intervention or rate cuts as required," said Goldman's G10
currency strategist Michael Cahill. 'INHERENTLY RISKY' Yet the Swissie, as it is known in currency markets, can be an
unreliable friend. Investors are prone to pile into the currency when they get
nervous, thanks to its long-standing safe-haven reputation. Cahill said the franc is best used as a funding currency at
moments when investors are feeling optimistic. A quick rally in the currency used to fund carry trades can
wipe out gains and cause investors to rapidly unwind their positions, as the
yen drama showed. High levels of volatility or a drop in the higher-yielding
currency can have the same effect. The SNB and Swiss regulator Finma declined to comment when
asked by Reuters about the impact of carry trades on the Swiss currency. As stock markets tumbled in early August, the Swiss franc
jumped as much as 3.5% over two days. The franc-dollar pair has proven
sensitive to the U.S. economy, often rallying hard on weak data that causes
U.S. Treasury yields to fall. "Any carry trade
is inherently risky and this is particularly true for those funded with
safe-haven currencies," said Michael Puempel, FX strategist at
Deutsche Bank. "The main risk is that when yields move lower in a
risk-off environment, yield differentials compress and the Swiss franc can
rally," Puempel added. A gauge of how much investors expect the Swiss currency to
move , derived from options prices, is currently at around its highest since
March 2023. "Considering the central banks, you can see how there may
be more sentiment for some carry players to prefer the franc over the
yen," said Nathan Vurgest, head of trading at Record Currency
Management. "The ultimate success of this carry trade might still be dependent
on how quickly it can be closed in a risk-off scenario," Vurgest said,
referring to a moment where investors cut their riskier trades to focus on
protecting their cash. Get the latest news and expert analysis about the state of the
global economy with the Reuters Econ World newsletter. Sign up here. Reporting by Harry Robertson; Editing by Dhara Ranasinghe and
Alexander Smith Key Insights from the
Article:
1.
Swiss Franc as a Funding
Currency:
2.
Carry Trade Dynamics:
3.
Safe-Haven Risks:
4.
Central Bank Influence:
5.
Strategist Views:
6.
Risks of Swiss Franc
Carry Trades:
7.
Investor Sentiment:
This
analysis highlights the opportunities |
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Chapter 5 Time value of Money Key Topics Covered: 1.
Future Value (FV): ·
Definition: The amount of money an investment
will grow to after earning interest over a specific period. ·
Formula: See the column to the right for
details. ·
Application: Learn how to calculate the
future value of savings or investments. 2.
Present Value (PV): ·
Definition: The current worth of a future
sum of money or cash flow, discounted at a specific rate. ·
Formula: See the column to the right for
details. ·
Application: Understand how to assess the
value of future payments or investments today. 3.
Payment (PMT): ·
Definition: The fixed payment required to
repay a loan over time, including interest. ·
Formula: See the column to the right for
details. ·
Application: Learn how to calculate
payments for loans, such as car loans or mortgages. 4.
Interest Rate (Rate): ·
Definition: The rate of return or cost of borrowing,
expressed as a percentage. ·
Formula: See the column to the right for
details. ·
Application: Learn how to determine the
interest rate needed to achieve a financial goal. 5.
Number of Periods (NPER): ·
Definition: The number of time periods
required for an investment to reach a specific future value or for a loan to
be paid off. ·
Formula: See the column to the right for
details. ·
Application: Determine how long it will
take to save or grow your money. 6.
Net Present Value (NPV), Net Future Value
(NFV) ·
Net Present Value (NPV): The difference between the
present value of cash inflows and outflows over a period of time. It is used
to assess the profitability of an investment or project. ·
Net Future Value (NFV): The future value of all
cash inflows and outflows accumulated at a specific interest rate. It
provides a measure of the total future worth of an investment. 7.
Effective Annual Rate (EAR) and Annual
Percentage Rate (APR) ·
Effective Annual Rate (EAR): ·
Annual Percentage Rate (APR): 8. Ordinary Annuity (PMT) and
Annuity Due (PMT, type=1) •
Ordinary Annuity (PMT): •
Annuity Due (PMT, type=1): Real-World Applications:
1.
Planning
for the Future: o Use
TVM concepts to plan for retirement, save for large purchases, or achieve
financial goals. 2.
Loan
Management: o Calculate
loan payments for car loans, mortgages, or student loans. o Compare
loans and understand the cost of borrowing. 3.
Credit
Card Decisions: o Evaluate
interest rates and payment terms to choose the best credit card. 4.
Investment
Opportunities: o Compare
investment options by calculating present and future values. Key Takeaways:
The time value of money - German Nande (video)
Tutoring of Time Value of Money
calculation in Excel (video) Chapter 5 – Escape Room – To Earn
Fake Etherum and Meme Coins Questions in the escape room
exercises: 1.
You
are investing $5,000 (Present Value) in an account that earns 4% annual
interest (Rate) for 8 years (Number of Periods). What is the Future Value of
your investment? (fv=abs(fv(4%, 8,
0, 5000)), or fv =5000*(1+4%)^8) 2.
You are investing $3,000 (Present Value) in
an account that earns 3% annual interest (Rate) for 12 years (Number of
Periods). What is the Future Value of your investment? (fv=abs(fv(3%, 12, 0, 3000)), or fv =3000*(1+3%)^12) 3.
You
need $20,000 in 10 years (Future Value) and can earn 3% annual interest
(Rate). What is the Present Value of your investment? (pv=abs(pv(3%, 10, 0, 20000)), or pv =20000/(1+3%)^10) 4. You need $15,000 in 5 years (Future
Value) and can earn 2% annual interest (Rate). What is the Present Value of
your investment? (pv=abs(pv(2%, 5,
0, 15000)), or pv =15000/(1+2%)^5) 5. You invested $5,000 (Present Value) and it
grew to $6,500 (Future Value) in 5 years. What was the annual interest rate? (rate=rate(5, 0, 5000, -6500)), or
rate = ln(6500/5000)^(1/5)-1) 6. You invested $8,000 (Present Value) and it
grew to $10,000 (Future Value) in 6 years. What was the annual interest rate?
(rate=rate(6, 0, 8000, -10000)), or
rate = ln(10000/5=6000)^(1/6)-1) 7. You invested $5,000 (Present Value) at an
annual interest rate of 4% and it grew to $6,000 (Future Value). How many
years did it take? (nper = nper(4%,
0, 5000, -6000), nper = ln(6000/5000)/(ln(1+4%)) 8. You invested $10,000 (Present Value) at an
annual interest rate of 5% and it grew to $15,000 (Future Value). How many years
did it take? (nper = nper(5%,
0,10000, -15000), nper = ln(15000/10000)/(ln(1+5%)) 9.
You take a $30,000 loan (Present Value) at 4% annual interest (Rate) for 5 years
(Number of Periods). What is your monthly payment? (pmt=pmt(4%/12, 5*12, 30000, 0)) 10. You take a $20,000 loan (Present
Value) at 3% annual interest (Rate) for 10 years (Number of Periods). What is
your monthly payment? (pmt=pmt(3%/12,
10*12, 20000, 0)) Chapter 5 Homework (due with the
first mid term) 1.
You
deposit $5,000 in a saving account at 10% compounded annually. How much is
your first year interest? How much is your second year interest? (500, 550) 2.
What
is the future value of $5,000 invested for 3 years at 10% compounded
annually? ( 6,655) 3.
You
just bought a TV for $518.4 on credit card. You plan to pay back of $50 a
month for this credit card debt. The credit card charges you 12% of interest
rate on the monthly basis. So how long does it take to pay back your credit
card debt? (11 months) 4.
You
are going to deposit certain amount in the next four years. Your saving
account offers 5% of annual interest rate. First year: $800 Second year: $900 Third year: $1000 Fourth year: $1200. How much you can withdraw four years later? (4168.35) (hint: refer
to https://www.jufinance.com/nfv/ ) 5.
You
are going to deposit certain amount in the next four years. Your saving
account offers 5% of annual interest rate. First year: $800 Second year: $900 Third year: $1000 Fourth year: $1200. How much is the lump sum value as of today (NPV)? (3429.31)
(Hint: use npv function in excel) 6.
Ten
years ago, you invested $1,000. Today it is worth $2,000. What rate of
interest did you earn? (7.18%) 7.
At
5 percent interest, how long would it take to triple your
money? (22.52) 8.
What
is the effective annual rate if a bank charges you 12 percent compounded
monthly? (12.68%) (hint: use effect function in excel) 9.
Your
father invested a lump sum 16 years ago at 8% interest for your education.
Today, that account worth $50,000.00. How much did your father deposit 16
years ago? ($14594.52) 10.
You
are borrowing $300,000 to buy a house. The terms of the mortgage call for
monthly payments for 30 years at 3% interest. What is the amount of each
payment? ($1264.81) 11.
You
deposit $200 at the beginning of each month into your saving account
every month. After two years (24 deposits total), your account value is
$6,000. Assuming monthly compounding, what is your monthly rate that the bank
provides? (1.74%) 12.
You want to buy a fancy car. For this goal,
you plan to save $5,500 per year, beginning immediately. You will make 4 deposits in an account that
pays 8% interest. Under these
assumptions, how much will you have 4 years from today? ($26,766.31) 13. The Thailand Co. is considering the
purchase of some new equipment. The quote consists of a quarterly payment of
$4,740 for 10 years at 6.5 percent interest. What is the purchase price of
the equipment? ($138,617.88) 14. Today, you are purchasing a 15-year, 8
percent annuity at a cost of $70,000. The annuity will pay annual payments.
What is the amount of each payment? ($8,178.07) 15. Shannon wants to have $10,000 in an
investment account three years from now. The account will pay 0.4 percent
interest per month. If Shannon saves money every month, starting one month
from now, how much will she have to save each month? ($258.81) 16. Trevor's Tires is offering a set of 4
premium tires on sale for $450. The credit terms are 24 months at $20 per
month. What is the interest rate on this offer? (6.27 percent) 17. Top Quality Investments will pay you
$2,000 a year for 25 years in exchange for $19,000 today. What interest rate
are you earning on this annuity? (9.42 percent) 18. Around Town Movers recently purchased a
new truck costing $97,000. The firm financed this purchase at 8.25 percent
interest with monthly payments of $2,379.45. How many years will it take the
firm to pay off this debt? (4.0 years) 19. You just received a credit offer in an
email. The company is offering you $6,000 at 12.8 percent interest. The
monthly payment is only $110. If you accept this offer, how long will it take
you to pay off the loan? (82.17 months) 20. What is the future value of weekly
payments of $25 for six years at 10 percent? ($10,673.90) |
Summary of math and excel equations Math Formula FV = PV *(1+r)^n PV = FV / ((1+r)^n) N = ln(FV/PV) / ln(1+r) Rate = (FV/PV)1/n -1 Annuity: N = ln(FV/C*r+1)/(ln(1+r)) Or N = ln(1/(1-(PV/C)*r)))/ (ln(1+r)) Excel Formulas To get FV, use FV function. =abs(fv(rate, nper,
pmt, pv)) To get PV, use PV
function = abs(pv(rate, nper,
pmt, fv)) To get r, use rate
function =
rate(nper, pmt, pv, -fv) To get number of years,
use nper function = nper(rate, pmt, pv,
-fv) To
get annuity payment, use PMT function = pmt(rate, nper, pv,
-fv) To
get Effective rate (EAR), use Effect function =
effect(nominal_rate, npery) To
get annual percentage rate (APR), use nominal function =
nominal(effective rate, npery) NPV NFV calculator(FYI, might be helpful) Time Value of Money
Calculator |
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Chapter 3 Financial Statement Analysis Ppt
Quiz on BS and IS
Quiz on Cash Flow
Statement Explaining 4
Financial Statements (youtube)
*************
Introduction *************** Let’s
compare Nike with GoPro based on 10K (www.nasdaq.com) https://www.nasdaq.com/market-activity/stocks/nke/financials https://www.nasdaq.com/market-activity/stocks/nke/financials Nike’s
Income Statement
Nike’s
Balance Sheet
Nike’s
Cash Flow Statement
Nike’s
Financial Ratios
Nike vs GoPro Financial Summary
Let’s
find it out by comparing stock performance between the two firms. Nike Stock Performance (finance.yahoo.com) https://finance.yahoo.com/quote/NKE/
Observations:
******* Part I: Balance Sheet and
Income Statement ************** Home Depot (Ticker in the
market: HD) reported the following information for the year ended January 30th,
2011 (expressed in millions). Sales: $67,977 Cost of goods sold: $44,693 Marketing, general and
administrative expenses: $15,885 Depreciation expenses:
$1,616 Interest expense: $530 Tax rate: 36.70% Number of shares
outstanding: 1,623 Dividends paid to
stockholders: $1,569. Use the above information
to try to prepare the income statement of Home Depot
for the year ended January 30th, 2011 Home Depot (Ticker in the
market: HD) reported the following information for the year ended January 30th,
2011 (expressed in millions). Cash: $545 Accounts receivables: $1,085 Inventories: $10625 Other current assets: $1,224 Gross fixed assets: $38,471 Accumulated depreciation:
$13,411 Other fixed assets: $1,586 Accounts payable: $9,080 Short term notes payable:
$1,042 Long term debt: $11,114 Total common stock: $3,894 Retained earnings: $14,995 Use the
above information to try to prepare the balance sheet
of Home Depot for the year ended January 30th, 2011 |
https://www.nasdaq.com/market-activity/stocks/gpro/financials
GoPro GoPro’s
Income Statement
GoPro’s
Balance Sheet
|