(Given in the order they are covered in class)

• CHAPTER 1 After studying this chapter students should understand differences in financial and real assets and be able to identify the major participants in the financial markets. Students should be able to describe the role of financial assets and markets in the economy and understand how the financial system meets the needs of economic participants. Students should be able to describe ongoing innovation in the financial markets.
• CHAPTER 2 Upon completion of this chapter the student should have a thorough understanding of the various financial instruments available to the potential investor. The student should have an insight as to the interpretation, composition, and calculation process involved in the various market indexes presented on the evening news. Finally, the student should have some understanding of the basics of options and futures contracts.
• CHAPTER 3 After studying this chapter the student should have considerable insight as to how securities are traded on both the primary and secondary markets. The student should understand the mechanics, risk, and calculations involved in both margin trading and short selling. The student should begin to understand some of the implications, ambiguities, and complexities of insider trading and regulations concerning these issues.
• CHAPTER 4 After studying this chapter the students should be able to identify key differences between open-end and closed-end investment companies. Students should be able to describe the expenses associated with investment in mutual funds and identify the major types of investment policies of mutual funds. Students should be able to describe services provided by mutual funds and be able to identify sources of information on investment companies.
• CHAPTER 5 After covering the chapter, the student should be able to describe the major factors that influence the level of interest rates be able to apply the Fisher effect to interest rates and inflation. Students should be able to calculate risk and return statistical measures, such as holding period returns, average returns, expected returns, and standard deviations, ex post and ex ante.
• CHAPTER 6 After covering the chapter, the students should understand how to measure expected return and expected future value for uncertain investments. They should understand the concept of risk aversion and utility. They should be able to apply the concept of risk aversion in measuring a utility function. The students should be able to describe the basic statistical measurements and properties that are used to develop portfolio theory.
  • The students should be able to construct portfolios of different risk levels, given information about risk free rates and returns on risky assets. The student should be able to calculate the expected return and standard deviation of these portfolios. After performing the above calculations, the student should begin to realize that higher returns are possible, but that increased risk must be assumed. Students should be able to construct portfolios of varying degrees of risk by simply altering the composition of the portfolio between the risk free securities and mutual funds. In addition, the student is introduced to the concept of further increasing returns and risk by buying additional risky securities with borrowed funds.
• CHAPTER 7 The students should be able to calculate the return and standard deviation for two security portfolios and be able to find the minimum variance combinations of two securities. Upon completion of this chapter the student should have a full understanding of systematic and firm specific risk, and of how one can reduce the amount of firm-specific risk in the portfolio by combining securities with differing patterns of returns. The student should be able to quantify this risk reduction concept by being able to calculate and interpret covariance and correlation coefficients. Building upon these concepts and upon the material in Chapter 7 (adding a risk-free asset to the portfolio and the reward-to-variability ratio), the student should be able to construct the optimal portfolio consisting of both risky and risk-free assets. Investors of different levels of risk aversion select varying combination of the risky asset portfolio and risk-free instruments. In addition, the student should be able to construct portfolios of different risk levels, given information about risk-free rates and returns on risky assets or portfolios of risky assets. The students should be able to calculate the expected return and standard deviation of these portfolios.
• CHAPTER 8 Upon completion of this chapter the student should have a full understanding of systematic and firm-specific risk, and of how one can reduce the amount of firm specific risk in the portfolio by combining securities with differing patterns of returns. By now, the student should realize that firm specific risk virtually may be eliminated by investing in a variety of securities, and that portfolio systematic risk is a weighted average of the betas of the securities in the portfolios, where weights are the asset allocation percentages. Furthermore, if the portfolio is adequately diversified and firm-specific (or non-systematic) risk is virtually eliminated, then beta (or systematic risk) becomes the relevant risk measure for the portfolio. Students should be able to describe the multi-factor models upon completion of this chapter.
• CHAPTER 9 After studying this chapter the student should have a thorough understanding of the development and the theory of the capital aset pricing model (CAPM), to be able to construct and use the security market line. The student should also have a thorough understanding of the zero beta formulization and the impact that differential liquidity costs may have on expected return.
• CHAPTER 11 & 12 After studying this chapter, the student should thoroughly understand the concept of market efficiency and how to make rational investment decisions based upon the existence of market efficiency. The student also should have a thorough understanding of the many test of market efficiency, the forms of market efficiency, and observed market anomalies.
• CHAPTER 13 Upon completion of this chapter the student should have a full understanding of how tests of single and multiple factor models are structured. Students should be able to identify the major anomalies that have been found in studies of returns on securities and be able to describe measurement problems associated with tests. Students should understand how stochastic volatility affects tests on security returns and be able to describe the findings on some major studies of stochastic volatility.
• CHAPTER 14 After studying this chapter, the student should thoroughly understand the concept of the pricing, characteristics, and risk determinants of bonds. The student should be able to calculate yields and prices of various types of bonds and understand the relationship between the yield curve and bond prices.
• CHAPTER 15 After studying this chapter, the student should thoroughly understand the concept of short term and long term rates. The student should be able to calculate forward rates and understand how term structure concepts apply to valuation of securities. Students should be able to describe the major theories of term structure and be able to describe the effects that the theories would have on observed term structure.
• CHAPTER 16 After studying this chapter, the student should thoroughly understand the concept of Duration, be able to calculate the duration of various bond portfolios, and to construct immunized portfolios appropriate for different investor categories. The student should also understand active bond portfolio management, from the concept of interest rate predictions and various possible market anomalies.
• CHAPTER 17 Upon reading this chapter, the student should have a thorough understanding of the macroeconomic factors that affect security prices. The student should understand the roles of fiscal and monetary policy in influencing interest rates. The student should also understand why some industry groups are more affected by macroeconomic factors that others.
• CHAPTER 18 After studying this chapter, the student should be able to value a firm using the appropriate dividend discount model and the dividend discount -derived price/earnings ratio. The student should understand the limitations of each of these models.
• CHAPTER 24 After studying this chapter, the student should be able to: calculate various risk-adjusted return measures, and use these measures to evaluate investment performance; and decompose excess returns into components attributable to asset allocation choices.
• CHAPTER 25 After studying this chapter, the student should understand the advantages of international diversification, and be able to devise hedge strategies to offset currency risk involved in international investing. The student should also be able to decompose investment returns into contributing factors such as country, currency, and stock selections. Finally, the student should be able to describe the investment alternatives available in the int'l market and the potential problems associated with int'l security analysis.
• CHAPTER 20 After studying this chapter, the student should be able to calculate potential profits resulting from various option trading strategies and to formulate portfolio management strategies to modify the risk return attributes of the portfolio. The student should also understand the put-call parity relationship, and be able to identify the embedded options in various assets and to determine how these option characteristics affect the prices of these assets.
• CHAPTER 21 After studying this chapter, the student should have a thorough understanding of the factors affecting option prices, be able to compute the option prices in the two scenario model of the economy (binomial option pricing), compute the Black and Scholes Value of an option, compute hedge ratios, and construct portfolio insurance strategies using option hedge ratios. The emphasis of this course will center on developing the skills and aptitude necessary to implement an active investment strategy. Whether you eventually choose to pursue an active management of your investment capital is not important. By gaining an understanding of the process, you protect yourself from potential investment fraud and mismanagement. The course will sharpen previously developed business analytical skills as well as introduce you to new tools. Investment professionals will provide an important real world (and current) connection. At least one professional will guest lecture during the semester.