FINAN508-22B (HAM)

Investments and Financial Markets

15 Points

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Division of Management
School of Accounting, Finance and Economics

Staff

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Convenor(s)

Leon Li

Leon Li
5650
MSB.3.27
See Moodle
leon.li@waikato.ac.nz

Lecturer(s)

Administrator(s)

: denise.martin@waikato.ac.nz

Placement/WIL Coordinator(s)

Tutor(s)

Student Representative(s)

Lab Technician(s)

Librarian(s)

: yilan.chen@waikato.ac.nz

You can contact staff by:

  • Calling +64 7 838 4466 select option 1, then enter the extension.
  • Extensions starting with 4, 5, 9 or 3 can also be direct dialled:
    • For extensions starting with 4: dial +64 7 838 extension.
    • For extensions starting with 5: dial +64 7 858 extension.
    • For extensions starting with 9: dial +64 7 837 extension.
    • For extensions starting with 3: dial +64 7 2620 + the last 3 digits of the extension e.g. 3123 = +64 7 262 0123.
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Paper Description

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This paper will discuss certain advanced topics in investment and financial markets, such as fixed-income securities (including the bond evaluation and the term structure of interest), security analysis (including equity valuation models and financial statement analysis), and derivatives securities (including valuation and trading strategies).

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Paper Structure

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The lectures will be delivered in FLEXI. Whilst I encourage in-person attendance, you can also join online via the Webcast option in Panopto for a live lecture broadcast (Please refer to the "FLEXI Information" section on Moodle for the details). Students are strongly encouraged to attend lectures in person or watch the live stream of the lecture each week. Lecture attendance will need to be recorded and this will be enabled during a short window in each lecture, to be announced by your lecturer during the lecture. Note that the window for recording your attendance may not necessarily be at the same time for each lecture. The lecturer has an extra credit policy for in-person and online live attendance (see the "Lecture Attendance" section on Moodle for the details).

for a live lecture broadcast Webcast option in Panopto

The lecture will be recorded via Panapto, and the video will be available on Moodle after the lecture. Students may use the videos as a tool to review the contents.

To help students' learning, I will chunk down the contents of each chapter into multiple sections. Each section will cover one or two specific topics for around 10-20 minutes.

In the lectures, I will provide quick access to the whys and hows of dealing with the questions in finance. I will offer easy-to-understand information, including equations and examples that can be quickly applied to the problems of finance.

The PowerPoint slides are uploaded onto Moodle for students to download before lectures. The slides with handwritten notes will also be uploaded to Moodle after each lecture. I hope the slides with notes may save your time in copying my notes, so they can concentrate on understanding the course materials during the lectures.

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Learning Outcomes

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Students who successfully complete the course should be able to:

  • Understand bond valuation and term structure of interest rates [LO1]
    Identify different types of bonds and explain how these bond features (such as the call feature, convertibility and sinking fund provisions) affect bond value and bond yields. Interpret bond ratings and address the major ratios that rating agencies use. Illustrate the term structure of interest rates.
    Linked to the following assessments:
  • Understand equity valuation and financial statement analysis [LO2]
    Understand and apply the various equity valuation models (e.g., the dividend discount model, the price/earnings ratio model and the free cash flow model) and address the limitations of each of these models. Analyse a firm using the financial statements to perform ratio analysis.
    Linked to the following assessments:
  • Understand different trading strategies using option contracts [LO3]
    Formulate portfolio management strategies using options and calculate potential profits/losses resulting from various option trading strategies. Understand how to hedge risks, speculate and lock in an arbitrage profit via option contracts.
    Linked to the following assessments:
  • Understand valuation of option contracts [LO4]
    Calculate option prices using the binomial trees and the Black-Scholes model and identify the factors that affect an option’s value.
    Linked to the following assessments:
  • Understand trading strategies and valuation of futures contracts [LO5]
    Calculate the daily profit and loss of margin trading arrangements for futures and illustrate the trading mechanics of the margin call. Illustrate determination of futures prices. Address the differences and similarities of forward, futures and options.
    Linked to the following assessments:
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Assessment

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The internal assessment/exam ratio (as stated in the University Calendar) is 100:0. There is no on-campus final exam. All the assessment components can be completed online.

Extra credit:

I strongly encourage students to attend lectures in person or watch the live stream of the lecture each week because the regular study may help their learning (i.e., avoiding the unstudied contents to accumulate up).

Students who achieve a 75% attendance rate and above will receive 10% bonus points for their tests. We have two tests, Test I and Test II. Extra credits for lecture attendance before (after) teaching recess will be accounted into Test I (Test II). The maximum mark for Test I and Test II is 100%.

To record lecture attendance, the lecturer will use the "Attendance Module" on Moodle (see "Lecture Attendance" Section on Moodle for the details).
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Assessment Components

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The internal assessment/exam ratio (as stated in the University Calendar) is 100:0. There is no final exam. The final exam makes up 0% of the overall mark.

The internal assessment/exam ratio (as stated in the University Calendar) is 100:0 or 0:0, whichever is more favourable for the student. The final exam makes up either 0% or 0% of the overall mark.

Component DescriptionDue Date TimePercentage of overall markSubmission MethodCompulsory
1. Online quizzes
30
  • Online: Submit through Moodle
2. Test I
15 Sep 2022
6:00 PM
20
  • Online: Submit through Moodle
3. Test II
20 Oct 2022
6:00 PM
30
  • Online: Submit through Moodle
4. Group Assignment: Stock Portfolio Construction
4 Nov 2022
5:00 PM
20
  • Online: Submit through Moodle
Assessment Total:     100    
Failing to complete a compulsory assessment component of a paper will result in an IC grade
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Required and Recommended Readings

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Required Readings

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Bodie, Kane, and Marcus, Essentials of Investments, 12th Edition (11th Edition is acceptable). McGraw-Hill Education, 2020.

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Recommended Readings

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Reading List Link.

Please refer to Reading List Link for the recommended textbooks, journal articles, useful websites, and databases.

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Other Resources

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Reference Style

Use the APA Referencing Style. The University of Waikato Library has put together a selection of resources to help you acknowledge your sources properly. http://www.waikato.ac.nz/library/study/referencing

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Online Support

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Lecture slides, workshop resources and related teaching materials will be available in Moodle.

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Workload

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The course has 24 (2 X 12) contact hours (lectures). The rest of the 150 hours of expected workload in this 15-point paper can be distributed as follows: 26 hours to complete the Group Assignment, 26 hours to prepare for and attend the Quizzes, 34 hours to prepare for, and attend Test I and 40 hours to prepare for and attend Test II.

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Linkages to Other Papers

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Prerequisite(s)

Acceptance into the Master of Applied Finance programme.

Corequisite(s)

Equivalent(s)

Restriction(s)

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