Course info

 Faculty of Business and Economics

Course Title:              Investment Principle

Course No.:                1303203

Classes:                      NT 9:30- 11               

Credit Hours:              Three Hours

Semester:                     1^st Semester 2014

Methods of Instruction: Lecturing/ Discussion

Lecturer: T. Shanti   Office: Faculty of Law - 1^st Floor Room (3210)  

E-mail:  talshanti@yahoo.com                Mob 0524567140

Office Hours:          

                       N 11:00 - 2:00           

Introduction:

This course is built on the material that we covered on the introductory course- Financial Market. It's about understanding the mechanism behind making an investment decision.

Pre-requisite: This  is a  3rd year level course . Its assumed that the student have already covered Principal of Financial Management and Financial Market. Students without this background will find it difficult to cope with the material.

Learning Outcome

At the end of this course the student will be able to

·create an optimal Portfolio

·Calculate Beta of the stock and portfolio

·Evaluate the portfolio through CAPM

·Calculate the yield of the different fix income securities

·Use option to Hedge and  invest in equity

Grading

·Med Term Exam 30

·Projects 20

·Class Participation 10

Text Book: Bodie, Kane and  Alan Marcus. Essentials of Investments. 2nd ed. New York, NY: McGraw Hill, 2007. ISBN: 9780071266758

Course Outline

Part1: Risk and Return (Chapters 5)

·Historical asset returns

·Bills, Bonds, and Stock

·Understanding the meaning of Risk ( Using Normal Distribution Graph)     - 1 class

·Asset Allocation across risky and Non Risky (pg 119-122

•Risk/reward trade-off (122-125)

·Practical Question pg 129       2 class

·Passive vs Active Strategy: Acadimic Research.

 Efficient Diversification (Ch 6- pg133)

·The Risk of portfolio of two Risky Asset (pg 135)

·The optimal Risky portfolio with Risk free ( pg 144)

·Solving Exercise (pg 155)

 The Capital Asset Pricing Model (Ch7-pg 164)

·Understanding the Model

·Does the model work in the real world

·How to calculate Beta ( Excel Exercise), and the return from CAPM

·How to use the model to  value of the stock through Gordon Model

·How to use the model to evaluate the performance of the portfolio

F Project One & Med Term Exam

Part 2: Fix Income Securities (Ch9/pg 225-260)

·Review of Fix Income Terminology

·Type of Fix Income

·Pricing different type of fix income

·Yield to Maturity vs. Holding period Return ( Bond vs. Preferred Stock)

·Zero Coupon Bond

·Term Structure of interest Rate

F Project 2

Part 3: Derivative Assets: Options and Future (Ch 15; pg 406)

·Understanding Forward Contract vs Future Contract

·How to use the future Contract to hedge against price fluctuation

·Option Terminology

·Call Option ( In the money, Out and at the Money Option)

·Stock Investing vs Call Option

·How to use Call option as a hedging tool

·Put Option ( In the money, Out and at the Money Option)

·Put - Call parity relation

·If time permit we study some strategies (Cover call strategy, Butter fly Strategy,---)