Subject Guide Sem 2 2019 PDF

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Subject Guide for Sem 2 2019...

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FNCE30001 Investments

SUBJECT GUIDE

Semester 2, 2019

Prepared by Dr Patrick J Kelly email: [email protected]

Department of Finance Faculty of Business and Economics

Contents SUBJECT OUTLINE ....................................................................................................................................... 3 INTRODUCTION ...................................................................................................................................................................... 3 SUBJECT AIMS .......................................................................................................................................................................... 3 LEARNING OUTCOMES............................................................................................................................... 3 SUBJECT OBJECTIVES ............................................................................................................................................................. 3 PREREQUISITES ............................................................................................................................................ 3 CONTACTING ACADEMIC STAFF ............................................................................................................. 4 LECTURES ....................................................................................................................................................... 5 LECTURE TIMES ...................................................................................................................................................................... 5 LECTURE AND TUTORIAL SCHEDULE……………………………………………………………………………5 LECTURE SLIDES AND TUTORIAL MATERIALS ................................................................................................................... 6 TEXTBOOK .............................................................................................................................................................................. 6 LECTURE RECORDINGS .......................................................................................................................................................... 6 ASSESSMENT .................................................................................................................................................. 6 ASSESSMENT OVERVIEW ....................................................................................................................................................... 6 EXAM POLICY.......................................................................................................................................................................... 6 TUTORIAL TIMES .................................................................................................................................................................... 7 TUTORIAL PARTICIPATION REQUIREMENTS ...................................................................................................................... 7 SPECIAL CONSIDERATION ..................................................................................................................................................... 8 ATTENDANCE POLICY ........................................................................................................................................................... 8 POLICY ON CALCULATORS IN EXAMINATIONS .................................................................................................................. 8 PLAGIARISM AND COLLUSION .............................................................................................................................................. 9 REFERENCING......................................................................................................................................................................... 9 ALTERNATIVE EXAM ARRANGEMENTS .............................................................................................................................. 9 OTHER SUBJECT RESOURCES................................................................................................................... 9 ONLINE TUTOR ...................................................................................................................................................................... 9 PIT-STOP TUTORIALS ............................................................................................................................................................. 9 FURTHER ASSISTANCE ........................................................................................................................................................... 9

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Subject Outline Introduction Welcome to FNCE30001 Investments, a core subject in the Bachelor of Commerce (Finance) program. With FNCE30002 Corporate Finance, this subject is one of the two foundation stones of our finance curriculum, and provides an entry point to advanced subjects. It provides foundational knowledge on the valuation, risk management, and arbitrage of investment assets.

Subject Aims The overall aim of this subject is to equip students with the tools necessary to enable them to make the core investment management decisions that managers face on a daily basis as well as the knowledge to find the information necessary to apply these tools. This subject is an introduction to investment analysis, with emphasis on equity securities and fixed-income securities. The topics covered focus on issues fundamental to financial managers, money managers, risk managers, financial advisers and regulators. These topics include fundamental ideas in asset pricing; modern portfolio theory and its applications; equilibrium theories of asset pricing; portfolio performance evaluation; and key issues in the pricing and portfolio allocation of fixed-income assets.

Learning Outcomes Subject Objectives To view the subject objectives and the generic skills you will develop through successful completion of this subject, please see the University Handbook: https://handbook.unimelb.edu.au/2019/subjects/fnce30001

Prerequisites FNCE20001 Business Finance or FNCE20005 Corporate Financial Decision Making, plus one of the many quantitative subjects listed in the Handbook.

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Contacting Academic Staff For All Content Related Questions All content-related questions must go through the on-line tutor, for this subject. Other tutors are expressly forbidden from answering content-related questions via e-mail or other electronic means. We do this because it allows everyone to learn from your brilliant and insightful questions. Log into the LMS, and go to “Investments FNCE30001_2019_SM2”  “Online Tutor”  Read the instructions about posting questions and follow the link that says, “online tutor”. (continued) Of course, you may and are encouraged to ask content-related questions during lecture, tutorials and office hours. PLEASE NOTE: Before the mid-term exam, the on-line tutor stops taking questions Thursday, 25 August at 11:59pm. Before the final exam, we stop taking questions 72-hours hours before the final. We do this to allow time for the on-line tutor to clear the backlog of questions.

Lecturer Contact Details Dr Patrick J Kelly Email: [email protected] (please include “FNCE30001” in the subject line) Office: 11.053 The Spot Phone: 03 834 43961 Consultation Hours: Tuesdays 4:00 pm – 6:00 pm or by appointment

Head Tutor Contact Details The head tutor is Mr Allan Horsfall. Email: [email protected]

Email Protocol Please see the top of the page about content-related questions. If you have an administrative question, you see an error in the lecture slides, please: 1) Use your University of Melbourne e-mail account. 2) Include “FNCE30001” in the subject line Please note that we are only permitted to respond officially to student emails coming from a University email address. Please do not use personal email addresses such as Yahoo, Hotmail or even business email addresses. Emails from non-University email addresses may be filtered by the University’s spam filter, which means that we may not receive your email. When emailing the lecturer or your tutor, please include “FNCE30001” in the subject line. All correspondence relating to this subject will be sent only to your University email address. Before emailing a question, please post it with the on-line tutor, so that everyone may benefit from seeing both question and answer. Also note that it is more appropriate to resolve substantive questions during lectures, tutorials and during normal consultation hours. FNCE30001 Investments S2-2019

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Lectures Lecture Times There are two lecture streams. As far as possible, lectures in both streams will be identical, but minor differences are inevitable. 

Monday: 3:15 pm – 5:150 pm at The Spot-B01 (Copland Theatre).



Tuesday: 11:00 am – 1:00 pm at PAR-Old Arts-122 (Public Lecture Theatre - PLT).

Lecture and Tutorial Schedule Week

Week Starts

Lecture Topic

Tutorial Topic

Bodie*

1

29 July

Overview, Interest Rates, and Bond Valuation

No tutorial

Ch 5.1, 9.1-9.4

2

5 August

Valuing Risky Bonds

Interest Rates, and Bond Valuation

Ch 9.6

3

12 August

Bond Portfolio Management

Valuing Risky Bonds

Ch 10

4

19 August

Term Structure

Bond Portfolio Management

Ch 9.6

5

26 August

MID-SEMESTER EXAM†

No Tutorials

Buying & Selling Stock 6

2 September

Measuring Risk & Reward

Term Structure

Ch 3, Ch 5.2-5.6

Portfolio Allocation Buying & Selling Stock 7

9 September

Portfolio Theory

Measuring Risk & Reward

Ch 6

Portfolio Allocation 8

16 September

Capital Asset Pricing Model

Portfolio Theory

Ch 7.1-7.3

9

23 September

Arbitrage Pricing Theory and other multi-factor models

Capital Asset Pricing Model

Ch 7.4-7.5

-

30 September

MID-SEMESTER BREAK

No Tutorials

10

7 October

Portfolio Performance Evaluation

Arbitrage Pricing Theory and other multi-factor models

Ch 18

11

14 October

Option Pricing and Risk Management

Portfolio Performance Evaluation

Ch 14

12

21 October

Market Efficiency

Option Pricing

Ch 8

*

All readings are from the prescribed textbook (bibliographic details below).

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†

The mid-semester exam will take place over one hour during regular class time. The University has not confirmed the venues yet, but seating lists (indicating which venue each student needs to go to) will be posted a week before the tests. No lectures or tutorials are held in the week of the mid-semester exam. Students must sit the exam for the lecture for which they are registered.

Lecture Slides and Tutorial Materials Lecture slides and tutorial materials will be placed on the LMS prior to each lecture.

Textbook The prescribed text is: Bodie, Z., Drew, M.E., Basu, A., Kane, A. and Marcus, A.J., Principles of Investments, McGraw Hill Irwin, 2013.

Lecture Recordings Lectures will be recorded using the lecture capture facility of the University of Melbourne. It is likely a mistake to rely on lecture recordings.

Assessment Assessment Overview Your assessment for this subject comprises the following: Assessment Task

Individual or Group

Due

Weighting

Tutorial attendance and homework

Individual

Weeks 4, 6-12

10.0%

Mid-semester exam

Individual

Week of 26 August

20.0%

End-of-semester (final) exam

Individual

TBA: no later than 22 Nov.

70.0%

The tutorial-related assessment is explained in more detail under the heading “Tutorial Participation Requirements” below.

Exam Policy The one-hour mid-semester exam FOR THE TWO STREAMS will be held in the week beginning 26 August, as detailed in the Lecture and Tutorial Schedule above. The exam is on material covered in the first 3 weeks (through and including “Bond Portfolio Management”). The exam is closed book. Approved calculators (see more details below) are permitted. The end-of-semester (final) exam will be held during the Semester 2 examination period and will be of 3 hours’ duration (to which 15 minutes reading time is added). The exam is closed FNCE30001 Investments S2-2019

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book. Approved calculators (see more details below) are permitted. This subject has a hurdle requirement: you must pass the exam to pass the subject. The University requires that you are available for the entire examination period. Please see the University's Principal Dates at http://www.unimelb.edu.au/dates - 2019 for the full annual calendar. Supplementary exams will not be provided in cases of absence during the examination period unless the absence is due to serious illness or other serious circumstances and a Special Consideration application is submitted and approved. Be sure NOT to purchase non-refundable travel arrangements until your exam timetable has been officially announced. Exams missed will score zero unless Special Consideration is granted. Academic staff are NOT able to decide Special Consideration. See the Special Consideration website for more information: https://students.unimelb.edu.au/admin/special-consideration.

Tutorial Times Please see the university time table: https://sws.unimelb.edu.au/2019/

Tutorial Participation Requirements 



Your tutorial grade is for attendance at the tutorial in which you are registered AND for turning in the homework before the tutorial begins. Missing either earns a zero. o You MUST attend the tutorial in which you have registered. You MAY NOT attend an alternate tutorial. Section 5.102 of the University’s Enrolment and Timetabling Policy (MPF 1294) states: “students are permitted to attend only the classes for which they have registered.” Answers to a set of questions (Part B) will be collected in each tutorial from weeks 4 and 6-12 (eight assignments in total). You will receive 1.25 marks if a genuine and reasonable attempt has been made to answer the questions set for that week (up to 10 possible marks). If you do not make a genuine and reasonable attempt at answering the questions, you receive zero marks for that assignment. I will replace ONE zero with a 1.25 (i.e., you get a ‘freebie’). Effectively, you can miss one assignment with no penalty. We do not grant extensions or give you credit for attending an alternate tutorial. Please don’t ask. o If you have a serious reason for missing a tutorial or not doing your homework, please see https://students.unimelb.edu.au/admin/specialconsideration for information on how to apply for special consideration. If you are enrolled in a tutorial that meets on the “AFL Grand Final” holiday on 27 September, then you automatically get 1.25 marks for week 9’s homework and tutorial attendance. If you are enrolled in Monday-through-Thursday tutorials, you still have to go and turn in your homework in week 9 – only Friday tutorials get a free pass. o





Rules for Part B: o

All answers must be handwritten (and not photocopied) and handed in at the beginning of your tutorial (the one you are enrolled in only) in the corresponding week. Once the tutor begins discussing Part B, no

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submissions will be accepted. This is an individual piece of assessment and any cases of collusion or plagiarism will be treated seriously. o

Only pieces of work personally handed in at the beginning of your tutorial will count towards assessment.

o

Late submission or submission without attendance is equivalent to no submission.

o

Make a photocopy of the work and bring it along to your tutorial for your own reference as the tutor will be going through the work during the tutorial and your submitted handwritten copy will be retained by the tutor.

Here are some examples of what could occur and the related outcomes: 1. You attend 8 tutorials and submit 8 pieces of genuine and reasonable attempts at the task: tutorial mark is 10 out of 10. 2. You attend 8 tutorials and submit 8 pieces of work but only 4 pieces are judged to be genuine and reasonable attempts at the task: tutorial mark is 6.25, comprised of 4 assignments at 1.25 marks each, plus the freebie of 1.25 marks. 3. You attend every tutorial but fail to hand in any work that is judged to be a genuine and reasonable attempt at the task: tutorial mark is 1.25, comprised of 0 marks for your work, plus the freebie of 1.25 marks. 4. You email a scanned copy of your work to the tutor because you can’t make the tutorial: zero marks awarded for that assignment. 5. You have a friend submit the work to the tutor on your behalf: zero marks awarded for that assignment. 6. For whatever reason you attend another tutorial where you submit an original copy of the required work: zero marks awarded for that assignment. In short, to be awarded a mark each week you need to submit an original handwritten copy of the answers to the Part B questions at the beginning of your assigned tutorial and then remain present throughout the tutorial. The Part B questions will be discussed in tutorials and will form a very important basis for your understanding of the topic. It is therefore very important that you attend tutorials and involve yourself in the discussion of these questions.

Special Consideration As a student, you may experience extraordinary or unusual circumstances, or ongoing circumstances that adversely affect your academic performance. The University has policies in place to support students who are experiencing academic disadvantage. For more information, visit https://students.unimelb.edu.au/admin/special-consideration.

Attendance Policy Please see “Tutorial Participation Requirements.” While not mandatory, it would be foolish to miss lecture.

Policy on Calculators in Examinations Effective from 1 January 2017, the approved calculator for all subjects is the Casio FX82 (any suffix). No equivalent models of calculators will be permitted in exams. You are FNCE30001 Investments S2-2019

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required to purchase your own calculator and are responsible for ensuring your calculator is in good working order with fresh batteries.

Plagiarism and Collusion Plagiarism (failure to cite your sources correctly and completely) and collusion (unauthorised collaboration with another person to prepare an assessment task) are considered academic misconduct and attract severe penalties. More information is available on the University’s Academic Integrity website via http://go.unimelb.edu.au/rha6. The Library also provides advice on referencing: http://library.unimelb.edu.au/cite.

Referencing All sources used for a written piece of assessment must ...