Economics 36 Theory of Finance Home Page

Economics 36: Theory of Finance

Course information

Course Schedule

Fall 2003

ANNOUNCEMENTS

10/26 This web page is no longer updated. Blackboard is working well. So all course materials starting with Lecture 12 and Midterm 1 Solutions are posted on Blackboard only. If you are a Dartmouth student auditing the course, e-mail me and I will add your name to Blackboard.

10/16 The first midterm will cover material in Chapters 1-8. Due to popular demand, I have posted a practice test and solutions. The first midterm from Winter 2002 and its solutions are now posted in the Course Documents section of Blackboard in the Tests folder. Please keep in mind that your test will have multiple choice questions and this one doesn't.

9/30 Your stock picks are set up in a Yahoo Finance account. Stocks were "bought" at the closing prices of September 29. Each student invested $1,000 in the stock (The number of shares was rounded off to the nearest whole number). To view your stock's performance log on to Yahoo Finance with the userid and password provided in class. The four portfolios are linked at the top of the page. Click on you section's portfolio. Each stock's owner is in the Notes column. The fourth portfolio is the S&P 500 index. It is the benchmark portfolio you want to beat.

Here are direct links to the portfolios (You will still need to log on)
Section 9
Section 10
Section 11
S&P 500

CLASS MEETINGS

CLASSROOM 202 Moore Hall

Section 1: Mon Wed Fri 8:45 am - 9:50 am, Th (x) 9:00 am - 9:50 am
Section 2: Mon Wed Fri 10:00 am - 11:05 am, Th (x) 12:00 pm - 12:50 pm
Section 3: Mon Wed Fri 11:15 am - 12:20 am, Tu (x) 12:00 pm - 12:50 pm

Faculty Information

Katerina Simons
Office Phone: (603) 646-4096
Office Address: 307 Silsby
E-Mail: katerina.v.simons@dartmouth.edu
Office hours – Monday 1:30 pm – 4 pm

REQUIRED TEXT

Brealey, R. and S. Myers. Principles of Corporate Finance. 7th ed. (New York: McGraw Hill, Inc., 2003). [Chapters marked as B in course calendar]

Study Guide to Accompany Brealey and Myers.

B. Malkiel. A Random Walk Down Wall Street (Revised ed.) Norton, 1999 (marked M in course calendar).

RECOMMENDED READINGS

Marked as R with a number in course calendar. All available from the course website.

R 1: Market Chief Stands Firm in Storm over Pay, The New York Times, September 14, 2003

C Corporation, LLC, or Sole Proprietorship? What Form Is Best for Your Business? Gary M. Fleischman and Jeffrey J. Bryant, Management Accounting Quarterly, Spring 2000

R 2: Should U.S. Investors Invest Overseas? Katerina Simons, Regional Review, Quarter 1, 2000.

R. 3 The Arbitrage Pricing Theory William Goetzmann, on line textbook

R 4 The Arithmetic of Active Management, William Sharpe, The Financial Analysts Journal, January/February 1991.

R 5. The Buyback Catch, CFO Magazine, March 2001

R 6: Getting Real, S. L. Mintz, CFO, November 1999

R 7 The Credit-Raters: How They Work and How They Might Work Better, Business Week, April 8, 2002

Martha The Oracle Daniel Gross in Slate.com, June 5, 2003

DESCRIPTION

This course covers the three major decision making areas in finance: the investment, financing and asset management decisions. It will help you understand how funds are raised and allocated in the financial markets. Beginning with portfolio theory and the tradeoff between risk and return, it shows how the definition of investor risk depends crucially upon diversification. Topics to be discussed include capital budgeting, market efficiency, option pricing, as well as modern asset pricing models and how they are used to determine the expected rate of return on investments.

PREREQUISITES Econ 10, 21, 26

EXAMINATIONS

There will be two midterms and a final. The tests will be closed-book, closed-note and timed. One 1-page cribsheet, both sides, with formulas, etc. is allowed for each exam. A calculator is essential. If you have a scheduling conflict and need to take the tests at another time, you must inform me within the first two weeks of class.

Midterm 1 – Wednesday, October 22 – 25% of grade

Midterm 2 – Wednesday, November 12 – 25% of grade

Final – December 8 at 11:30 - 50% of grade

HOMEWORK ASSIGNMENTS

There will be 6 problem sets posted on the course web site. These problem sets will not be collected, but it is vitally important that you work the problems if you wish to comprehend the material and gain a good working knowledge of finance.

ALSO REQUIRED

A calculator – bring it to class everyday. Either a scientific {1/x, e^x, ln( ), y^x } or a financial calculator will do. You will also need the calculator for homework problem sets and exams.

EQUAL ACCESS

I encourage students with disabilities, including chronic illnesses, learning disabilities and psychiatric illnesses, to discuss with me after class or during my office hours appropriate accommodations that might be helpful to them. Such discussions must precede any exams on which special accommodations are needed.