Instructor: Donald W. Swanton
Contact Information: office Wabash 1112Z, telephone (312) 281-3278, fax (312) 281-3290, email email@example.com, web site http://sites.roosevelt.edu/dswanton/. My web site has information about office hours etc. Google “Swanton Roosevelt” to find me most easily.
Time: Monday evening 6:00-8:30
Location: WB 611
Text: There is no required text. I will be handing out my Notes on Investments (S) in class as the semester progresses. Recommended are The Psychology of Investing 4th ed. By John R . Nofsinger Prentice Hall ISBN-13: 978-0-13-611703-2 and A Random Walk Down Wall Street (completely revised 2011)by Burton Malkiel. Get this one cheap in whatever format from Amazon.com. It’s a good read.
Prerequisites: ECON 101-102, MATH 116 or 121, ENG 101-102, ECON 234 or MATH 217, and FIN 311.
Goals: In this course students look at long-term investment situations, such as retirement planning, and we use the theoretical tools of modern finance to explore the trade-offs between risk and return.
Student Learning Objectives: business discipline principles, quantitative techniques.
Grades: Grades will be determined by an average of the best three out of the four quiz grades and the retirement planning project. Quizzes and the project will receive the numerical version of letter grades, A = 4.00, A/B = 3.50, B = 3.00 B/C = 2.50, etc. I will send out sample quizzes the week before each quiz.
Attendance: I do not take attendance.
Plagiarism: Please review Roosevelt’s policy on plagiarism. www.roosevelt.edu/plagiarism.
Religious Holidays: Roosevelt’s policy is to accommodate students who will be celebrating religious holidays. Talk to me in the first couple of weeks, and we will work something out.
Notes: My Notes on Investments currently consist of:
S1 Risk and Return
S2 Real and Nominal Returns
S3 Retirement Planning
S4 Efficient Markets
S5 Event Studies
S6 The Two Fund Separation Theorem
S7 Bond Risk and its Measurement: Duration
S8 The Term Structure of Interest Rates
S9 Interest Rates and Bond Prices
S10 The Theory of Interest
As of April 15, 2013
Date Notes Topics
Jan 11 S1, S9 Introduction, risk and return, interest rates and bond prices
NOTE! This first class is on FRIDAY to make up for the holiday.
Jan 14 S2 Real and Nominal Returns
Jan 21 //// No Class: Dr. King’s Birthday observed
Jan 28 S2, S3 Real and nominal again, retirement planning
Feb 4 S3 Retirement planning
Feb 11* S4 Efficient Markets, stock and bond markets
Feb 18 /// Review of probability and statistics, correlation
Feb 25 S6 The Capital Asset Pricing Model
Mar 4* S6 More
Mar 11 S6 More
Mar 18 //// Spring Vacation
Mar 25 S6, S10 The birth and death (?) of beta, the theory of interest
Apr 1 S10 The theory of interest
Apr 8* S8 Interest rates and bond prices, term and risk structures
Apr 15 S8, S9 Bond risks: default and price level risk
Apr 22 S7 Interest rate and reinvestment rate risk: duration
Project due Monday Apr. 22, 2013
Apr 29* //// Last Quiz
The asterisk * denotes a quiz that week. This schedule is tentative. We may get ahead of it at some points and will probably fall behind at others. Revised schedules will always be on my web page.
THE RETIREMENT PROJECT
First Choice Project
You are a financial planner. You have clients who are just beginning to think about planning for retirement. They are both thirty five years old and have $80,000 in a company retirement plan which they can roll over into their own plan. They want to retire at 67 but are wondering what effect retiring a year or two earlier or later will have on their retirement. Their combined income is $100,000 per year, and they want to finance the same income in retirement in real terms. When they retire they can purchase a two-life annuity with an expected second death at age 87. They need retirement and portfolio planning.
They have not taken any finance courses, and their last mathematics course was many years ago. They will not understand equations, formulas, or finance jargon. Large tables will make their eyes glaze over. Charts and graphs may be helpful. You must explain your recommendations to them in simple, ordinary language. Prepare a plan with some alternative rates of return and retirement dates and explain what annual contributions they must make to the plan to make their retirement what they want. Talk in depth about the trade-off between risk and high expected return. Make your own assumptions about social security by the time they retire.
Alternative Retirement Project
Use yourself as the client, with your own present situation. This client differs from the real you, because he/she has not taken any finance courses and does not know any more than the clients in the First Choice project.
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