FIN 301 Class Web Page, Fall '13

Instructor: Maggie Foley

Jacksonville University

The Syllabus (section 01 as an example)

Reference website: https://www.jufinance.com/fin500 (has excel functions and sample questions, but harder than this course)

Weekly SCHEDULE, LINKS, FILES and Questions

Week

Coverage, HW, Supplements

-        Required

WSJ Papers Reference

Videos (optional)

Week 1

Chapter 5 HW solution

Chapter 5 HW Solution excel

Question:

Your owe \$5,000 to a credit card. This old card charges 18% of interest rate. There is a chance to transfer your debt to a new card with 0% interest rate for the first year and 8% of interest rate after that. But the transfer is going to cost you about 3% of the total balance. Is it a good offer?

Fall of Lehman Brother part i

Fall of Lehman Brother part ii

Fall of Lehman Brother part iii

Fall of Lehman Brother part iv

Fall of Lehman Brother part v

Fall of Lehman Brother part vi

(with portfolio return, correlation, and standard deviation)

Steps:

1. Go to finance.yahoo.com and look for AAPL (apple) in search window.

2. On the left panel, look for historical prices. Click it.

3. Change the date to incorporate a five year period and use the monthly price.

5. Keep the date and the adj close column. Adj close is the closing price adjusted for dividend.

6. Calculate the monthly return. Return = (P2-P1)/P1.

7. Calculate the average of the monthly return and the standard deviation of the monthly return.

8. Calculate the risk return ratio which equals to standard deviation / return.

9. Repeat the above and get the monthly return for GE, WMT, GOOG, Exxon, and Ford.

10. Set up an equally weighted portfolio with two stocks, such as GOOG and WMT. Calculate the average return of this two stock portfolio.

Calculate the coefficient using CORREL function. Calculate portfolio’s return.

Rp= 50% * Return of GOOG + 50%*return of WMT.

σp2 = 50%2WMT2 + 50%2goog2+ 2*50%*50%*Correlation * σWMT*σgoog  (not required)

11. Repeat the above to calculate the correlation and return of the two stocks’ portfolio:

(GOOG, GE), (GOOG, AAPL), (GOOG, EXXON), (GOOG, Ford).

12. Compare the correlation and returns among the five portfolios.

13. conclude about how to pick stocks to reduce risk while maintaining the return (refer to the graph).

14. Calculate beta, using slope function in excel.

Beta of Apple = slope(apple return,  S&P500 return)

# Funny Moneyman Credit Card Game Show

Chapter 5 HW solution                         Chapter 5 HW solution excel

Chapter 6 HW solution                          Chapter 6HW solution excel

First Mid Term Part I – Chapter 5

Study Guide

Multiple Choice (12*2.5=30)

1. Given the deposits and interest rate, calculate first year interest and second year interest.
2. Calculate future value given the deposits and interest rate and number of years.
3. Pay off the debt on credit card. Calculate how long does it take to pay back your credit card debt?
4. Given the next four year cash flows, calculate net future value.
5. Given the next four year cash flows, calculate NPV.
6. Calculate the rate using rate function
7. Triple investment, how long does it take?
8. Calculate effective annual rate (EAR)
9. Calculate NPER
10. Calculate mortgage payment
11. Annuity due
12. Annuity due

Short answer question (10*2=20) – Similar to on of the questions in the prior exams

Extra Credit (2*3=6 points)

First Mid Term Part II – Chapter Six

Study Guide

Multiple Choices (2.5*15=37.5)

1. Calculate expected return using sumproduct.
2. Compare several investment choices based on returns and probability
3. Calculate expected return using sumproduct.
4. Calculate expected return using sumproduct.

5-10 CAPM and SML questions, such as slope, intercept, market return, risk free rate, etc.

11. Systematic risk vs. unsystematic risk

12.  Calculation of holding period return

13. Concept of diversification.

14. SML and CAPM concept question

15. Diversification, risk and return concept question

You plan to invest in stock X. Describe the necessary procedures for the estimation of the risk level of this stock. In other words, describe the necessary steps that you need to follow in order to find out the value of Beta of stock X (hint: we estimated Beta of Apple, GE, etc. in class. Just repeat the process).

Extra Credit (5 points)

First Mid Term chapter 5 on Monday

First Mid Term chapter 6 on Wednesday

Videos – Financial market and institutions

Capital Market vs. Money Market

Mutual Fund, Retail Banking, Investment Banking, Venture Capital

# Mysterious island (part II) (2013)

IPO articles

Interest Rate – Fishers’ Effect

1.      What is nominal rate?

2.      What is inflation?

3.      What is real rate?

Which rate is more important

Chapter 3 PPT

All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR.

EDGAR online

Steps:

1.      Go to EDGAR online

2.      Search AAPL

3.      Search financial statement of AAPL in 2012, 2011, 2010, and 2009.

Chapter 3 HW questions (due next Monday)

Chapter 3 HW solution

Stock screening tools

FINVIZ.com

We will focus on several ratios:

P/E (price per share/earning per share)

P/B (market price per share / book value per share)

PEG (PE ratio / growth rate. PEG<1, undervalued stock)

EPS (earning per share)

EPS growth (EPS growth rate)

ROA (Return on Asset = NI/TA)

ROE (return on equity = NI/TE)

Current ratio (liquidity measure. = CA/CL)

Quick ratio (liquidity measure. = (CA-Inventory)/CL)

Debt/Equity (Leverage measure. = TD/TE)

Gross margin (profit measure. = EBITDA/sales, or = Gross margin/sales)

Operating margin (profit measure. = EBIT/sales, or = operating income/sales)

Net profit margin (profit measure. = NI/sales)

Payout ratio (= dividend / NI, measures distribution to shareholders).

HW:

Calculate all ratios above of WalMart except PEG, EPS growth rate, using the most recent financial statement of WMT (due on Friday).

## The Billion Dollar Secret

### The Zacks Rank Guide to Trading Success

Second Mid Term

(chapter 3, 4, one day exam on Monday)

Second Mid Term Exam Study Guide

Multiple Choice (20*4=80)

1.       What is the amount of the inventory, given other balance sheet information.

2.      What is the amount of the total equity, given other balance sheet information.

3.      What is the amount of tax paid, based on income statement.

4.      What is the retained earning, based on income statement.

5.      What is the changes in net working capital from 2008 to 2009?

6.      What was change in cash flow in investment

7.      What is the net change in cash flow in operation

8.      What is the net change in cash flow in financing

9.      Definition of use of cash and source of cash.

10.  How much is the tax rate, based on income statement.

11.  How much is the quick ratio?

12.  How much is the debt ratio?

13.  How much is the P/E ratio?

14.  What is the return on asset?

15.   What is the total asset / tot

16.  asset equity ratio?

17.  Definition of financial statement

18.  How much is operating income?

19.  How much is net income?

20.  How many shares of stock are outstanding, based on income statement.

21.  Balance sheet question.

Report the cash flow statement based on the financial statement

How Bonds Work (video)

FINRA – Bond market information

Summary of bond pricing excel functions

To calculate bond price (annual coupon bond):

Price=abs(pv(yield to maturity, years left to maturity, coupon rate*1000, 1000)

To calculate yield to maturity (annual coupon bond)::

Yield to maturity = rate(years left to maturity, coupon rate *1000, -price, 1000)

To calculate bond price (semi-annual coupon bond):

Price=abs(pv(yield to maturity/2, years left to maturity*2, coupon rate*1000/2, 1000)

To calculate yield to maturity (semi-annual coupon bond):

Yield to maturity = rate(years left to maturity*2, coupon rate *1000/2, -price, 1000)*2

HW of bond pricing (due on next Wednesday):

Page 246, study problems 7-2,  7-4, 7-8, 7-12, 7-15, 7-16, 7-17, 7-19, 7-22

# Bond Yields Fall in U.S., U.K., Germany

Treasury Bond Auction and Market information

 NYSE top gainers 10.31.2013 125.34 28.32 2.99 M 21.84 19.87 2.29 M 14.4 17.55 17.15 M 73.77 17.37 0.47 M 3.83 16.06 60.24 M 8.51 14.84 7.67 M 15.99 14.13 1.20 M 51.96 13.77 1.10 M 81.02 12.5 3.03 M 26.04 11.33 1.55 M 8.9 11.11 9.78 M 28 10.41 0.00 M 14.58 10.04 0.43 M 27.81 9.66 0.32 M 34.82 9.5 2.34 M 12.95 9.38 0.75 M 50.63 9.33 3.31 M 5.67 8.41 0.61 M NYSE top decliners 10.31.2013 17.5 -21.88 34.91 M 24.82 -19.96 0.16 M 16.84 -19.58 4.98 M 32.11 -19.56 7.45 M 10.56 -18.64 15.22 M 15.51 -12.62 2.14 M 1.32 -11.41 0.57 M 17.25 -11.17 11.27 M 31.88 -10.55 1.53 M 78.44 -10.06 0.21 M 1.82 -9.9 0.00 M 47.59 -9.78 4.17 M 41.2 -8.67 2.65 M 14.62 -8.57 0.02 M 166.67 -7.95 1.06 M 7.97 -7.75 0.47 M 7.3 -7.59 0.00 M 229.59 -7.31 0.16 M 4.18 -7.11 2.13 M 22.67 -7.09 9.01 M

# Jim Cramer Tells You How to Trade Like a Professional

Chapter 7 HW Solution Word File

Excel File

Chapter 8 HW Solution Word File

Excel File

Third Mid Term Exam Study Guide

Multiple Choices (22.5*4=90)

Issuer     Callable                   Coupon _rate     Maturity                 Moody Rating       Price       Yield

GE                          Yes            5%                         07/15/2015          A                             95.38      _____

Use the above information to answer the following questions (1-7)

1. What is callable bond?
2. How much is the coupon?
3. Bond ranking by Moody: Low or high ranking?
4. Giving price, coupon rate, nper, calculate yield
5. Giving price, coupon rate, nper, calculate current yield
6. Given yield to maturity, coupon rate, nper, calculate price of bond.
7. Given yield to maturity, coupon rate, nper, calculate price of bond.
8. Zero coupon bond price calculation
9. Treasury bill zero coupon bond price calculation (remember: Treasury bill’s maturity is less than one year but the method is the same as longer term bond)
10. During bankruptcy, the order of claims of investment between bond holder and stockholder.
11. Dividend yield equation

Answer the questions 12-15 using the following information.

1. Using CAPM to calculate stock return: risk free rate, market return, beta all are given.
2. Using dividend growth model to calculate stock price.
3. Future dividend calculation
4. Future stock price calculation (hard one)
5. Using dividend growth model to calculate returns

Questions 17-19 are based on the following information.

1. Calculate the holding period return, given price and dividend
2. How much is the capital gain yield, given price and dividend
3. How much is the dividend yield, given price and dividend

20.  Understand how to pick undervalued stock using PEG ratio.

Given bond price, yield, coupon rate and calculate years to maturity

Extra Credit (3 points) Uneven dividend given, calculate stock price

ECB Time Line of Financial Crisis

The great Euro crisis 2012

Monday Chapter 10

Happy Holiday

Monday: Chapter 10

(Multi IRR Question ( CF0=-1600, CF1=10000, CF2=-11000, CF3=2000))

Wednesday: Review

Final Exam Study Guide

Multiple Choices (19*4.5=85.5)

1. Choose two mutually exclusive projects: rule, concept

2. Calculate NPV

3. Calculate payback period

4. Calculate IRR

5. Calculate profitable index

6. Two mutually exclusive projects. Calculate and choose one.

7. Two mutually exclusive projects. Calculate crossover rate.

8. Two mutually exclusive projects. Calculate and choose one.

9. Two mutually exclusive projects. Calculate and choose one.

10.  Find after tax cost of debt

11.  Find cost of equity

12.   What is weight of debt (hint: weight of debt = total debt / total asset)?

13.   What is weight of equity (hint: weight of equity = total equity / total asset)?

14.   What is WACC?

15. What is the after tax cost of debt if the tax rate is 40 percent?
16.  What is the weight of debt?
17.  What is the cost of equity?

18. Concept of WACC

19. Concept of WACC

Understand npv profile and can draw the profile. What about two projects in the same profile?

Extra Credit (5 points)

Find both of the IRRs for the nonnormal cash flows.

Comprehensive Final (optional)