University of Lethbridge – Department of Economics

ECON 2850(A) – Financial Economics

Summer 2008

 

 

 

Instructor:	Michael G. LANYI
Class Times:	Tu. & Th. 9:00 – 11:50	Office:	C–574
Place:	C–610	Phone:	332–4590
Office Hours:	MWF 11:30 – 12:20
	C–574

 

Required Materials:

 

MATHEMATICS OF FINANCE, Sixth Edition

Zima, Petr.  McGraw–Hill Ryerson

 

The Study Guide to the above text is available in the Bookstore and is HIGHLY recommended (but not required).

 

MATHEMATICS OF FINANCE, Second Edition

Zima, Petr.  McGraw–Hill Ryerson

 

Course Objectives:

 

This course deals with simple and compound interest, with applications to continuous interest, annuities and perpetuities, loan and mortgage payments, sinking funds, bonds, capitalization and depreciation. Topics will include the calculation of net present values, basic asset pricing, evaluation of risk and return, capital budgeting and financial derivatives. Basic principles of optimal portfolio theory, including the Capital Asset Pricing Model will be covered (if time permits). This course equips students with a thorough understanding of the interplay between basic concepts of Economics and Finance. With the help of notes and class instruction students will be introduced to the spreadsheet and its use in financial economics. (A good scientific calculator will be needed as well.) The course should be especially interested to students of business and economics. The emphasis will be on practical problems.

 

Course Outline:

 

Students are strongly encouraged to read the course material before attending lectures. Unless otherwise stated in class, students should read the entire chapter corresponding to the various topics outlined below (appendices can be omitted unless otherwise stated in class). The course material with chapter references is as follows:

 

No.	Topics	Reading
1.	Simple Interest and Simple Discount	Ch. 1
2.	Compound Interest	Ch. 2
3.	Simple Annuities	Ch. 3
4.	General and Other Annuities	Ch. 4
5.	Repayment of debts	Ch. 5
6.	Bonds	Ch. 6
7.	Business Decisions, Capital Budgeting	Ch. 7
	And Depreciation
8.	Math Review (as needed)

 

Lectures

 

While attendance in class is not mandatory and absences will not factor into the final course grade, randomly circulated class list might provide bonus marks for attendance. Since not all materials are covered in the text book, students are strongly encouraged to attend lectures. Certain materials will be posted to the class web page on WebCT. These are made available to assist you during lecture. They are not a substitute for attending lectures. You are responsible for printing these (if required) and bring them to class. Out of respect for all students in the class, unnecessary disruption will not be tolerated. Missing lectures is not a valid excuse for inability to answer any exam question.

 

Laboratories

 

Although Laboratories are not provided during the course practice is essential to successfully master the material. Therefore a large fraction of the lecture time will be set aside for practicing each new concept.

 

Examinations, Absence Policy and Grade Determination

 

There will be four (4) quizzes and a final exam. These will be counted as 60% of your final grade. The final exam is partially cumulative worth the remaining 40% of your final grade. There might be optional Bonus Assignments. All the quizzes will be held in the classroom while the final exam will held during the final exam period (scheduled by the Registrar’s office). The quizzes are tentatively scheduled as follow:

 

 

Bonus Incentive on Performance:

 

You will have an opportunity to receive 1.5% bonus added to your final grade if the following condition is met.
If your final exam grade is higher than your best quiz grade, you will receive 1.5% bonus. This bonus is designed to give you an incentive to perform better toward the end of the course.

 

Absence from Exam Policy:

 

Except under extremely unusual circumstances, if an exam is to be missed for any valid reason (and this does happen), you must give notification before the scheduled time of the exam by calling my office. This is then followed up with appropriate documentation (e.g., a medical certificate) within 48 hours of the missed exam. Failure to do one or both of these will result in a failing grade on the examination.

 

There will be NO make–up Quizzes! The weight of any missed Quiz will be added to the final exam.

 

Except under extremely unusual circumstances, no requests will be entertained for early or delayed exams.

 

Letter grades will be based on numerical final grades as follows:

 

	A+	90	<		A+
	A	85	<		A	≤	90
	A–	80	<		A–	≤	85
	B+	77	<		B+	≤	80
	B	73	<		B	≤	77
	B–	70	<		B–	≤	73
	C+	66	<		C+	≤	70
	C	63	<		C	≤	66
	C–	60	<		C–	≤	63
	D+	56	<		D+	≤	60
	D	50	≤		D	≤	56
	F	0	≤		F	<	50

 

Students should keep all graded exams. In the case of disagreement between your recorded mark and the mark on your exam, the latter will be taken to be correct.