FIN301 Class Web Page, Spring ' 20
Instructor: Maggie Foley
Jacksonville University
Business
Finance Online, an interactive learning tool for the Corporate Finance
Student http://www.zenwealth.com/BusinessFinanceOnline/index.htm
Weekly SCHEDULE, LINKS, FILES and Questions
Chapter 
Coverage, HW, Supplements 
Required 
References


Chapter
1, 2 
Discussion: How to pick stocks (finviz.com) Daily earning announcement: http://www.zacks.com/earnings/earningscalendar IPO schedule: http://www.marketwatch.com/tools/ipocalendar FYI: MarketWatch Stock
Game written by Maelyn O’Connor (Thanks, Maelyn) 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, nonfinancial 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. 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
Introduction
to Capital Markets  ION Open Courseware (Video) How the stock market works (video) No homework for chapter 2 


Chapter 5 Time value of Money Time
value of money (Video) The
time value of money  German Nande (video)
Tutoring of Time Value of Money calculation
in Excel （video） Chapter
5 Homework (due on 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) 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) 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%) 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? ($14594.50) 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) 13. Citi card is giving
you a good deal. You can transfer your balance from your current credit card
to Citi new card with $50 balance transfer fee. The new card charges at 5% a
year. But your old card charges at 12% a year. Your balance in your old card
is $5,000. If you can afford to pay back to the credit card of $250 a month.
How much quicker does it take you to pay back your debt with the new card?
(Hint: for the new card, your debt = 5000+50=5050; Assume monthly compounding
by credit card companies). (1.28 months) 14.
Your girlfriend just won the Florida lottery. She has the choice of $40,000,000 today or
a 20year annuity of $2,850,000, with the first payment coming one year from
today. If the mutual fund of hers provides 4% of return each year for the
next 20 years, which payment option is more attractive to her? ($40million) 15.
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) 16.
The
condominium at the beach that you want to buy costs $249,500. You plan to
make a cash down payment of 20 percent and finance the balance over 10 years
at 6.75 percent. What will be the amount of your monthly mortgage
payment? ($2,291.89) 17.
Today,
you are purchasing a 15year, 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) 18.
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) 19.
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) 20.
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) 21.
You
have just won the lottery! You can receive $10,000 a year for 8 years or
$57,000 as a lump sum payment today. What is the interest rate on the
annuity? (8.22 percent) 22.
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) 23.
Expansion,
Inc. acquired an additional business unit for $310,000. The seller agreed to
accept annual payments of $67,000 at an interest rate of 6.5 percent. How
many years will it take Expansion, Inc. to pay for this purchase? (5.68
years) 24.
You
want to retire early so you know you must start saving money. Thus, you have
decided to save $4,500 a year, starting at age 25. You plan to retire as soon
as you can accumulate $500,000. If you can earn an average of 11 percent on
your savings, how old will you be when you retire? (49.74 years) 25.
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) 26.
Fred
was persuaded to open a credit card account and now owes $5,150 on this card.
Fred is not charging any additional purchases because he wants to get this
debt paid in full. The card has an APR of 15.1 percent. How much longer will
it take Fred to pay off this balance if he makes monthly payments of $70
rather than $85? (93.04 months) 27.
Bridget
plans to save $150 a month, starting today, for ten years. Jordan plans to
save $175 a month for ten years, starting one month from today. Both Bridget
and Jordan expect to earn an average return of 8 percent on their savings. At
the end of the ten years, Jordan will have approximately _____ more than
Bridget. ($4,391) 28.
What
is the future value of weekly payments of $25 for six years at 10
percent? ($10,673.90) 29.
At
the end of this month, Bryan will start saving $80 a month for retirement
through his company's retirement plan. His employer will contribute an
additional $.25 for every $1.00 that Bryan saves. If he is employed by this
firm for 25 more years and earns an average of 11 percent on his retirement
savings, how much will Bryan have in his retirement account 25 years from
now? ($157,613.33) 30.
Sky
Investments offers an annuity due with semiannual payments for 10 years at 7
percent interest. The annuity costs $90,000 today. What is the amount of each
annuity payment? ($6,118.35) 31.
Mr. Jones just won a
lottery prize that will pay him $5,000 a year for thirty years. He will
receive the first payment today. If Mr. Jones can earn 5.5 percent on his
money, what are his winnings worth to him today? ($76,665.51) 
Summary of math and excel equations Math
Equations 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)) EAR
= (1+APR/m)^m1 APR
= (1+EAR)^(1/m)*m 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 

Chapter 6 Risk and Return Risk
and Return in class exercise Excel file here will be provided soon Steps: In class exercise Excel Results (BABA, TESLA, Apple,
S&P500) 1. Pick three stocks. Has to be the leading firm
in three different industries. 2. From finance.yahoo.com, collect stock prices
of the above firms, in the past five years Steps: ·
Goto finance.yahoo.com,
search for the company ·
Click on “Historical prices” in the left
column on the top and choose monthly stock prices. ·
Change the starting date and ending date to
“1/24/2019” and “1/24/2020”, respectively. ·
Download it to Excel ·
Delete all inputs, except “adj close” – this is
the closing price adjusted for dividend. ·
Merge the three sets of data just downloaded 3. Evaluate the performance of each stock: ·
Calculate the monthly stock returns. ·
Calculate the average return ·
Calculate standard deviation as a proxy for
risk ·
Calculate correlation among the three stocks. ·
Calculate beta. But you need to download
S&P500 index values in the past
five years from finance.yahoo.com. ·
Calculate stock
returns based on CAPM. ·
Draw SML ·
Conclusion and take away?
Effect
of Diversification Please refer to template Chapter 6 In Class Exercise(Word file here )
HW of chapter 6 (Due with
the second mid Term exam) Chapter
6 Homework 1)
Stock A has the following returns for various states of the economy: State
of the
Economy Probability Stock
A's Return Recession 10% 30% Below
Average 20% 2% Average 40% 10% Above
Average 20% 18% Boom 10% 40% Stock
A's expected return is? (ANSWER: 8.2%) 2)
Joe purchased 800 shares of Robotics Stock at $3 per share on 1/1/09. Bill
sold the shares on 12/31/09 for $3.45. Robotics stock has a beta of 1.9, the
riskfree rate of return is 4%, and the market risk premium is 9%. Joe's
holding period return is? (ANSWER:
15%) 3. You
own a portfolio with the following expected returns given the various states
of the economy. What is the overall portfolio expected return? (ANSWER:
9.05%) State
of economy probability
of state of
economy rate
of return if state occurs Boom 27% 14% Normal 70% 8% Recession 3% 11% 4)
The prices for the Electric Circuit Corporation for the first quarter of 2009
are given below. The price of the stock on January 1, 2009 was
$130. Find the holding period return for an investor who purchased the stock
onJanuary 1, 2009 and sold it the last day of March 2009. (ANSWER: 2.12%) Month
End Price January $125.00 February 138.50 March 132.75 5)
Collectibles Corp. has a beta of 2.5 and a standard deviation of returns of
20%. The return on the market portfolio is 15% and the risk free rate is 4%.
What is the risk premium on the market?
(ANSWER: 11%) 6)
An investor currently holds the following portfolio: Amount Invested 8,000
shares of
Stock A $16,000 Beta = 1.3 15,000
shares of Stock B $48,000 Beta = 1.8 25,000
shares of Stock C $96,000 Beta = 2.2 The
beta for the portfolio is? (ANSWER:
1.99) 7)
Assume that you have $165,000 invested in a stock that is returning 11.50%,
$85,000 invested in a stock that is returning 22.75%, and $235,000 invested
in a stock that is returning 10.25%. What is the expected return of your
portfolio? (ANSWER: 13%) 8)
If you hold a portfolio made up of the following stocks: Investment
Value Beta Stock
A $8,000 1.5 Stock
B $10,000 1.0 Stock
C $2,000 .5 What
is the beta of the portfolio? (ANSWER:
1.15) 9. The riskfree rate of
return is 3.9 percent and the market risk premium (r_{m} –r_{f})
is 6.2 percent. What is the expected rate of return on a stock with a beta of
1.21? (ANSWER: 11.4%) 10. You own a portfolio consisting of the stocks below. Stock Percentage
of
portfolio Beta 1. 20% 1 2. 30% 0.5 3. 50% 1.6 The risk free rate is 3% and
market return is 10%. a. Calculate
the portfolio beta. (ANSWER:
1.15) b. Calculate
the expected return of your portfolio. (ANSWER: 11.05%) 11. Computing holding period return for Jazman and
Solomon for period 1 through 3 (bought in period 1 and sold in period 3).
Show the holding period returns for each company. (ANSWER: 50%, 25%) Period Jazman Solomon 1 $10 $20 2 $12 $25 3 $15 $15 12. Calculate expected return
(ANSWER:
12%)
13. Calculate the expected returns of the
following cases, respectively 1) Invest
$10,000 in Treasury bill with guaranteed return of 4%. (ANSWER: 4%) 2) Investment
$10,000 in Apple. 50% possibility to earn 20% return and 50% possibility to
lose 10% of investment.(ANSWER: 5%) 3) Investment
$10,000 in WalMart. 50% possibility to earn 5% return and 50% possibility to
earn 0% of investment.(ANSWER: 2.5%) 14. Rank the risk of the following cases, from
the least risky one the most risky one
(ANSWER: 1, 3, 2) 1) Invest
$10,000 in Treasury bill with guaranteed return of 4%. 2) Investment
$10,000 in Apple. 50% possibility to earn 20% return and 50% possibility to
lose 10% of investment. 3) Investment
$10,000 in WalMart. 50% possibility to earn 5% return and 50% possibility to
earn 0% of investment. 15. An
investor currently holds the following portfolio: Amount Invested 8,000
shares of
Stock A $10,000 Beta = 1.5 15,000
shares of Stock B $20,000 Beta = 0.8 25,000
shares of Stock C $20,000 Beta = 1.2 Calculate
the beta for the portfolio.(ANSWER:
1.1) 16. Joe
purchased 800 shares of Robotics Stock at $5 per share on 1/1/13. Bill sold
the shares on 4/18/13 for $6. Robotics stock has a beta of 1.2, the riskfree
rate of return is 1%, and the market risk premium is 10%. Joe's holding
period return is how much? (ANSWER:
20%) 
Holding Period Return Calculator Two Stock Portfolio Return and
Standard Deviation Equations (FYI) stdev(array of returns) Excel
for beta used in CAPM slope(array of stock returns,
array of market returns) Portfolios – two stocks Calculator http://www.jufinance.com/portfolio/ Equations: W1 and W2 are the percentage of each stock in the
portfolio.


First Mid Term Part I (Chapter 5)  2/18 First Mid Term Part II (Chapter 6)
 2/20 Study
Guide Multiple Choices (20*2.5=50)
Refer to the above table to answer questions 110. 1. How much is company 1’s average return in the past five months? 2. How much is company 1’s risk level in the past five months (standard deviation) if it is evaluated individually? 3. What is the beta of the company 1? (hint: check slope) 4. What is the correlation between company 1 and company 2? 5. What is the correlation between company 1 and company 4? 6. What is the beta of the company 2? (hint: check slope) 7. What is the beta of the company 3? (hint: check slope) 8. Among company 1, 2, and 3, which one is the most risky one, based on beta? 9. The correlation between a pair of stocks 1012CAPM calculation 1314SML line: slope, intercept 15.
Stock A has the following returns for various states of the
economy: Economy Probability Stock
A's Return Recession given given Average given given Boom given given Stock A's expected return is? 16. holding period return? 17.
Calculate the portfolio’s
beta given amount in each stock and beta. 18. systematic risk example 19. What is diversification 20. What is risk and return relationship? 

Chapter 3 Financial Statement Analysis Experts Explain: Financial Statements (well
explained, video) *************
Introduction *************** Let’s
compare Nike with GoPro based on 10K (www.nasdaq.com) Nike Income
Statement (values in 000's)
Nike Balance
Sheet (values in 000's)
Nike Cash
Flow Statement (values in 000's)
