FINC 215 Introduction to Institutions and Investments Course Guide
A survey course designed to help students recognize the interrelationship between human behavior and firm performance in the valuation of stocks and bonds. The central theme of this course will be how and why forces in the economy (both behavioral and economic) lad to the establishment of stock prices. Through projects and simulations, students will explore the interrelationships between financial institutions, financial policies and stock market valuations.
Specific, Assessable, Learning Objectives
At the conclusion of this course students will:
- have a basic understanding of domestic financial institutions and markets; with particular focus on the form and functioning of equity markets.
- be able to demonstrate a fundamental understanding of the processes involved in obtaining a price of a stock using the Gordon model, and cash-flow discount model.
- have a fundamental understanding of the Capital Asset Pricing model and its use in estimating the cost of capital.
- have a basic understanding of how we measure risk and use those measurements in selecting instruments for financial investment
- have a conceptual understanding of the basic structure of a firm, how financing is acquired and utilized, as well as how the firm is controlled for the benefit of owners.
- have a basic understanding of how banks create money, the limits on banks ability to lend, bank regulation, and how the Fed controls the banks ability to lend.
- have a basic understanding of how the Federal Reserve designs and implements monetary policy and how it effects the economy (monetary theory) and the firm.
- have a basic understanding of understand the interrelationship between interest rates, stock prices, the operations of the firm, and monetary policy.
- Intro to markets and institutions, and instruments
- The firm (ownership, control, supervision, cash-flow, sources and uses of funds)
- Capital markets (Bonds, stocks, underwriting,, investment bankers, mutual funds)
- Valuation models (Gordon model, discounted cash flows) concepts with simple applications
- Money market instruments, placing and acquiring short term funding
- Banking, limits on lending, creation of money, bank failure, insurance
- Interest rates & measures, real & Nominal, behavior of rates, effect on firm
- Measuring risk & choosing instruments, reinvestment risk, default, interest rate risk
- Conduct of Monetary policy, tools of Fed, impact on firm, term structure
- Monetary Policy and Theory using it to make decisions and how it effects firm
- Inflation, interest rates, and economic activity.
This course will contain at least one project, designed by the professor, which focuses upon valuation of a firm's stock but may be designed to examine multiple learning objectives. In the project, students must actually search out data and implement the required valuation processes. In all cases it must provide students with feedback during the process. This may include by not be limited to the use of drafts, etc.
In any semester it is expected that the professors teaching this course will assess at least 75 percent of the learning objectives.
Recommended Assessment Measure
The following assessment measures might be used:
The use of some essay or short answer questions on the midterm and final to assess selected learning objectives
One page discussion papers on assessable learning objectives followed by class discussion.
The use of case studies or other assignments focused on selected learning objectives
Statement of Expectations
Students are expected to take an active role in their learning experience and will be expected to read the assigned material and complete written assignments prior to class.
Students should actively participate in class and attempt to use the language of finance and business as they express their questions and ideas.
Since this course will focus on understanding the material and developing the ability to understand its use, students need to allocate sufficient out-of-class time and effort to prepare for in-class activities.
Since ECON 102 is a prerequisite, students should have a basic understanding of supply and demand, banking, and the monetary policy. However, as a sophomore level course, we expect students to enter with analytic and computational skill commensurate with that level of development.
Institutional Mechanism for Providing Feedback for Continuous Quality Improvement
The Department of Finance will annually review the results of assessment from this course and assess their implications for the program students are enrolled in. We will respond in the following manner: seek additional information, and/or alter the course to improve outcomes, and/or discuss deficiencies with other departments providing components of the program that might more directly confront the outcomes observed.