FIN 365

FIN 365-01: Financial Institutions and Markets

Dr. Chong Y. Kim

Le Moyne College, Syracuse, NY, Spring 2002, Phone: (315)445-4391,
E-Mail:Kim@lemoyne.edu, Fax: 445-4787, Room: RH-309
PREREQUISITES: FIN 301, Office hours: T Th 12:00-1:00 and by appointment.


Required:
(1) Text: Jeff Madura, Financial Markets and Institutions,
5th (2001) Ed., South-Western Publishing.
(2) Readings: The Wall Street Journal (WSJ)

Recommended:
Business Week, Fortune, Barron's, The NY Times, and other business periodicals.

Course description:
This course focuses on the operation, mechanics, and structure of the financial system, emphasizing its markets, institutions, and instruments. Each of us as an individual consumer or as manager, may interact in the financial market in a wide variety of ways during our lifetime. These activities require a knowledge of how the financial system operates and what causes interest rates and the availability of credit to change.
Classes will be balanced among lectures, discussions, problem solving, and reading of research articles. It is expected that the student will have read the assigned readings and prepared the questions and problems before coming to class. Failure to attempt them will significantly reduce the meaningfulness of class discussion and may prove detrimental to performance on subsequent tests.

Objectives:
  1. To examine the regulatory and market environment of financial institutions to provide students with a sense of the challenges faced by those who currently manage these institutions.
  2. To develop theories of interest rate determination, interest rate risk, and interest rate risk management.
  3. To investigate and analyze financial instruments available to investors and issuers in global markets.
  4. To investigate issues in the management of assets and liabilities of depository and nondepository financial institutions.


    Grading
    2 Midterms: 40%
    Final 40%
    WSJ research project II: 15%
    Individual contributions (include Proj. I): 5%

    Attendance is required. Maximum number of unexcused absence allowed is 3.
    Every absence beyond 3 lowers the final grade by one letter grade.


    WSJ Project I
    Each student is required to read the column, “Heard on the Street” which appears in section C of the WSJ. Class discussion on Thursday and Friday articles will be held on the following Tuesday.

    WSJ Project II
    The students will be divided into teams comprising of 3-4 members. Each team must choose a financial firm (Mutual Funds or Securities firm) for its financial analysis. Each assignment must be turned in on time. Don’t wait until the deadline. Each day of delay will cost one letter grade- No Excuse.

    1. Each team should submit names of team Members by 1/22.
    2. By 1/29, submit a 1-page preliminary report on your chosen firm. The report should include:

    (a) Name of the firm
    (b) Name of the CEO or chair of the board
    (c) A short history of the firm
    (d) Line of Business
    (e) Revenue, earnings, EPS, ROE for the last 5 years, and
    (f) Attach a copy of Value Line investment survey report on your firm
    3. Charts and Tables(dates to cover: 2/4-4/12):
    • (a) Construct a table containing two series of daily figures for S&P 500, NYSE Finance Index, and stock price of your firm reported in the W SJ.
      Series 1: reported values;
      Series 2: indexed value with 100 for 2/4.Construct a table containing daily figures for S&P 500, NYSE Finance Index, and Stock price of your firm,
    • (b) Construct a line chart using the 2nd series (indexed) values. Use spreadsheet software(e.g. Excel).

    4. Articles (dates to cover: 2/4-4/12):
    • (a) Collect articles from the WSJ which deal with your chosen firm or industry developments.
    • (b) Choose the 5 most important articles from your collection and put each on a separate sheet of paper and write a brief description explaining why this articles is important for understanding your firm.

    5. Report (due by 5/2): Write a double-spaced, typewritten, 4-5 page research report which analyzes your firm’s financial performances including:
    (a) the primary characteristics of your firm,
    (b) financial weakness and strength of the firm
    (c) future course of financial performances expected, and
    (d) the degree of acceptance of the firm in the markets.

    Attach the chart, table, and articles from 3 and 4.



    Course Outline (tentative)

    Date
    Topics
    Assignments
    Jan.
    15, 17, 22, 24,29
    Overview; Interest rates- mechanics and structure
    Financial systems, intermediation, financial markets
    Supply and demand for funds, an element of risk,
    Y-curves. Theories of interest rate
    Ch 1, 2, 3.
    Q1-2,3,9.
    Q2-2,3,7
    Q3-2,4: P3-1,3
    31
    Feb.
    5, 7, 12
    Federal Reserve System
    Central banking. Structure of FRS, tools of monetary policy, regulatory role.
    Ch. 4, 5
    Q4-3,7
    Q5-1,4,6

    Exam 1- 2/14: ch. 1-5
    19, 26, 28
    Mar.
    5, 7.
    Money and Bond Market
    money instruments, T-bonds, corporate bonds, munis, bond valuation.
    Ch 6,7,8
    Q6-2,4; P6-1,2,
    Q7-2,5,7
    Q8-1, 3; P8-1,3
    12, 14, 19, 21 Stock Market and Valuation
    Public placement, stock exchanges, stock indexes, factors affecting stock prices, search for undervalued stocks.
    Ch 10,11
    Q10-1,4; P10-1
    Q11-2,4; P11-1,2

    Exam 2 - 4/2: ch. 6,7,8,10,11
    April
    4, 9, 11, 16, 18
    Derivative Securities: Futures, Options,
    Currency Derivartives

    Ffinancial futures, hedging, index, speculation, regulatory structure, regulation, liquidity, interest rate risk, default risk.
    Ch 12, 13, 15
    Q12-2,5; P12-1,3
    Q13-4,6:P13-1,2
    Q15-2,5;P15-1,3
    23, 25, 30
    May
    2
    Nonbank Financial Institutions
    mutual funds, investment banking, brokerage services, pension funds.
    Ch 23, 24, 26
    Q23-1, 6, 10
    Q24-1, 4, 10
    Q26-1, 5, 6

    Final - 5/13: ch.12,13,15,23,24,26