Foundations of Finance (B01.2311) Fall 2008 William L. Silber Homepage: www.stern.nyu.edu/~wsilberEmail: [email protected] SYLLABUS Texts (BKM) Bodie, Kane and Marcus, Essentials of Investments, 7th edition, Irwin, 2007 (RWJ) Ross, Westerfield and Jordan, Fundamentals of Corporate Finance, CUSTOM VERSION (includes chapters 4,5 and 8) (G) Garbade, Securities Markets, CUSTOM VERSION (H) Handout Packet (Note: BRING THIS TO EVERY CLASS) Prerequisites This is a core course that assumes no prior background in finance. However, the class requires knowledge of basic economic and statistical concepts. During the first week of class you will need the economic concepts of supply and demand curves, including how shifts in the curves change the equilibrium price. By the fourth week of class, you will need a working knowledge of indifference curves. If you have not already mastered this content you must take the Firms & Market core course which covers these materials in time for our use. From statistics you will need to understand mean, standard deviation, covariance and correlation as descriptive statistics. By the third week of class you will have to understand probability statements based on the area under the normal curve. By the fourth week of class you need to understand the regression coefficient as a summary statistic. All of this material will be covered in your core statistics class in time for our use. Before and After Book This pamphlet, distributed on the first day of class, provides an outline of sub-topics covered in each lecture as well as a list of concept questions that relate to each topic. Use the pamphlet before reading the assigned material to set the stage and after to check your comprehension. Emails Check your email regularly for weekly outlines from me and other announcements Calendar Check the course calendar in the Handout Packet or in the course website for scheduled alterations in regular class meetings. In addition, the calendar lists dates for the mid term, final, and other deliverables. TA Review Sessions Monday, 4:30-5:50, Room 2-70, KMC Wednesday, 4:30-5:50, Room 2-70, KMC Web References The course web site can be found under courses at www.stern.nyu.edu/~wsilber. A small group of websites appears in the outline to reference either real time data or educational tools that are especially relevant for a particular topic. Although the directions to the material are currently accurate they may change. You may need a few extra clicks to get to the right spot. Location Guide Video Tapes: Available on my web site within two days of each lecture Solutions Manual for BKM is on reserve at Bobst's Reserve Room My Office is room 965 in KMC TA Office is on the 7th floor in KMC Grades and Exams The distribution of grades, as mandated by the finance department is as follows: A, A- : Between 20 and 25 percent of the class; C+ and lower: Between 10 and 15 percent of the class; B+, B, B-: the remainder.Grades will be based on a mid-term exam (42.5%), a final exam (42.5%) and problem sets (15%). The "Market Tracking Assignment" (see the next item in the Handout Packet) will form the basis of about 10% of the questions on each exam. Also see the discussion under Classroom Responsibilities below. The mid-term and final are not cumulative. You must take them both. You must be present at the mid-term and final exam dates. There will be no make-up exams during the semester. If you miss any exam you will have to wait until the beginning of the next semester for a make-up. Problem Sets A pamphlet with Problem Sets for the entire term will be distributed on the first day of class. The problems are designed to provide numerical drill to complement the conceptual class discussions and are NOT supposed to be representative of exam questions. You must submit handwritten answers (no word processors or photocopies) to each set (I-IV), and to the Real Time Exercise, when they are due, as indicated in the course outline below. Late submissions will not be accepted. You will receive full credit (3% per set) if you have made a good faith effort to answer the questions, whether or not the answers are correct. Partial credit will not be awarded. Calculator You will need a calculator that has net present value, internal rate of return, yield to maturity, natural logarithm and exponential functions. An HP12C is sufficient for this class. You are expected to learn how to use a calculator on your own. You will need it for homework and the exam (no laptops permitted at exams). Group Study You are strongly advised to set up study groups to review the course material each week. You may also do your homework problems together. A minimum of three people is recommended for each study group. Try to include at least one non-finance major in your study group. This will broaden your group's perspective. Do not wait until exam time to set up your study group. By then it is too late. Honor Code You are responsible for maintaining Stern's honor code which mandates zero tolerance for cheating. Violations of the honor code will be prosecuted with a minimum penalty of failure for the course as required by honor code rules. As indicated above, you may work in groups on your homework problems but you must submit your own handwritten answers. The exams are closed book. You may bring to the exams only a writing implement and your calculator. In the event that your calculator is programmable you may NOT enter any formulae or data (e.g., associated with the market tracking assignment). If you become aware of any violations of the honor code you must take whatever steps are necessary to stop the violators. Classroom Responsibilities and Civility Approach each class as though you were attending an important business meeting--prepare, arrive on time, participate, but do not try to dominate. Arrange your affairs so that you do not leave the room during class (if you have a medical problem see me at the start of the semester). Here are some specific guidelines designed to promote a beneficial classroom experience: Class Participation: Students learn from questions asked by other students as well as by answers from classmates, whether or not the proposed answers are correct. Therefore, you have a responsibility to come to class and participate in the discussions. I will encourage class participation to the best of my ability, turning to forced compliance only after friendly persuasion fails. No Late