Financial Institutions Management Finance 326

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Financial Institutions Management. Finance 326. Fall 2012. College of Business Administration. San Diego State University. Instructor Dr. David Ely. Office:.
Financial Institutions Management Finance 326 Fall 2012 College of Business Administration San Diego State University Instructor Dr. David Ely Office: Phone: Email: Office Hours:

SS 3410 619.594.6842 [email protected] M noon - 1:00, TH 8:30 - 9:30, 11:00–noon, and by appointment

Course Objective The primary objectives of this course are to acquire the skills necessary to contribute toward the management of a financial firm, to describe and apply financial concepts, theories, and tools, and to evaluate the role of technology and the legal, ethical and economic environment as it relates to financial institutions including the Federal Reserve, commercial banks, insurance companies, mutual funds, investment banks, pension funds, federal regulatory agencies, and federal and state guaranty institutions. Primary Learning BSBA Program Goals Outcomes BSBA students will graduate being:  Effective Communicators  Critical Thinkers  Able to Analyze Ethical Problems  Global in their perspective  Knowledgeable about the essentials of business Finance 326 contributes to these goals through its student learning outcomes. After completing this course, you should be able to: 1. Describe the dimensions of performance and risk relevant to financial firms. 2. Calculate contemporary measures of financial measures of performance and risk. 3. Describe contemporary managerial risk management oversight processes. 4. Explain how the financial services component industries (insurance, banking, securities, real estate and financial planning) interact. 5. Design hedging strategies to manage market risks (e.g., currency, commodity, economic and political). 6. Evaluate the economic environment and the impact of governmental economic policies on consumers and financial institutions. 7. Describe the impact that financial innovation, advances in technology, and changes in regulations has had on the structure of the financial firms/industry Course Prerequisite FIN 323 or equivalent

Required materials Anthony Saunders and Marcia Millon Cornett, Financial Markets and Institutions, 5th edition, McGraw Hill. (The 4th edition is an adequate substitute for the 5th edition.) ProBanker Bank Management Simulation access. The charge is approximately $25 per student. See the Probanker website for details on the simulation: http://www.probanker.com/ Optional McGraw Hill Connect is available for this text, but is an optional resource. Blackboard Course material, including supplemental readings and my lecture notes, will be provided on Blackboard. In addition to posting material, we will use the assessment and grade book features of the system. To access Blackboard at SDSU, go to http://blackboard.sdsu.edu Course Activities Text Readings The Saunders/Cornett text describes the theory and practice of providing financial services from a risk management perspective. The listed reading assignments should be completed prior to class meetings. Bank Management Simulation We will play a bank management game beginning in September. Groups of 3 students will manage a bank in a simulated competitive market. Decisions on strategy, pricing, capital, investments, and risk management will be made following an analysis of your bank's financial position and markets. One class session will be devoted to introducing the game and organizing teams. Several exercises will be completed individually. Then five rounds of the game will be played in a competitive mode. The grade for the game will be based on: the bank's performance and your ability to explain and justify your bank's decisions. Additional details on this assignment will be provided in class. Instructions on how to access the simulation website will be provided in class. The charge is approximately $25 per student. Examinations The midterm exams and the comprehensive final exam will cover material from the textbook and lectures and will consist of multiple-choice, problems, shortanswer, and essay questions. It will be in a closed-book and closed-notes format. You will need a calculator for exams. No other electronic device (e.g., phone, laptop, iPad, etc.) are permitted during exams. To take exams, students must present a photo ID such as an SDSU ID card or a driver's license. All exams will be retained. Commonly missed questions will be reviewed in class and students are welcome to discuss their individual exams during office hours. Quizzes Five short quizzes will be administered in class. The lowest quiz score will be dropped. Classroom etiquette Students are expected to attend every class meeting and to participate in a variety of course activities. You may use a labtop/iPad during class sessions for taking notes and viewing lecture notes. However, refrain from activities unrelated to the class discussion. Finance 326 – Financial Institutions Management

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Assessment Course grades will be assigned in accordance with San Diego State University policy (see General Catalog, pp. 467). Undergraduate grades shall be: A, outstanding achievement; B, praiseworthy performance; C satisfactory performance; D, minimally passing and F, failing. The grade for average undergraduate achievement shall be C. Your course grade will be based on six components with the following weights:

Component Exam 1 Exam 2 Final Exam Probanker Rate Sensitivity Assignment (individual) Probanker Performance (group) Probanker Summary Report (individual) In Class Quizzes Total Percentage of total points 93 to 100 90 to 92 87 to 89 83 to 86 80 to 82 77 to 79 73 to 76 70 to 72 67 to 69 63 to 66 60 to 62 0 to 59

Points 100 100 150 20 50 30 40 490

Guaranteed Course Grade A AB+ B BC+ C CD+ D DF

Cheating and SDSU defines cheating and plagiarism in the following manner.1 Plagiarism “Cheating shall be defined as the act of obtaining or attempting to obtain credit for academic work by the use of dishonest, deceptive, or fraudulent means. Examples of cheating include, but are not limited to (a) copying, in part or in whole, from another’s test or other examination; (b) discussing answers or ideas relating to the answers on a test or other examination without the permission of the instructor; (c) obtaining copies of a test, an examination, or other course material without the permission of the instructor; (d) using notes, cheat sheets, or other devices considered inappropriate under the prescribed testing condition; (e) collaborating with another or others in work to be presented without the permission of the instructor; (f) falsifying records, laboratory work, or other course data; (g) submitting work previously presented 1

San Diego State University Policy File. pp. 18.

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in another course, if contrary to the rules of the course; (h) altering or interfering with the grading procedures; (i) plagiarizing, as defined; and (j) knowingly and intentionally assisting another student in any of the above.” “Plagiarism shall be defined as the act of incorporating ideas, words, or specific substance of another, whether purchased, borrowed, or otherwise obtained, and submitting same to the university as one’s own work to fulfill academic requirements without giving credit to the appropriate source. Plagiarism shall include but not be limited to (a) submitting work, either in part or in whole, completed by another; (b) omitting footnotes for ideas, statements, facts, or conclusions that belong to another; (c) omitting quotation marks when quoting directly from another, whether it be a paragraph, sentence, or part thereof; (d) close and lengthy paraphrasing of the writings of another; (e) submitting another person’s artistic works, such as musical compositions, photographs, paintings, drawings, or sculptures; and (f) submitting as one’s own work papers purchased from research companies.” Policies on sanctions and due process in review of alleged violations are available at: http://newscenter.sdsu.edu/universitysenate/index.aspx The penalty for academic dishonesty in this course is an F grade. Cases of academic dishonesty will be reported to the Center for Student Rights and Responsibilities.

Tentative Schedule* August 28, 30 Topic: Introduction Reading: Chapter 1, 1A End-of-chapter (EOC): Ch 1 [Questions 1,8,10,11,12,13,14,15] September 4, 6 Topic: Commercial banking industry; Bank performance analysis Readings: Chapter 11, 12 EOC: Ch 11 [Questions 3,5,11,15,17,19]; Ch 12 [Questions 3,8,11,14; Problems 6,8,9] September 11, 13 Topic: Bank regulation Reading: Chapter 13, 13B, 13C, 13D EOC: Ch 13 [Questions 1,6,9,10,11,12,14,20; Problems 7] Quiz 1 (Sept 13) September 18, 20 Topic: FI risk overview Reading: Chapter 19 EOC: Ch 19 [Questions 2,6,7,8,21; Problems 2,3,5,6] Quiz 2 (Sept 20) September 25, 27 Topic: Probanker introduction Readings: Probanker Manual October 2 Exam over Chapters 1, 11, 12, 13, and 19

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October 4 Topic: Interest rate models Reading: Chapter 2 EOC: Ch 2 [Questions 1,2,3,4; Problems 1,4,6,7,9,11,24,32,35,36,43] October 9, 11 Topics: Security valuation; Duration Reading: Chapters 3, 3A EOC: Ch 3 [Question 2; Problems 4,6,11,12,22,23,29,30,38,39] Quiz 3 (Oct 11) Probanker Rate Sensitivity Assignment due Oct 9 October 16, 18 Topic: Federal Reserve; Monetary policy Reading: Chapter 4 EOC: Ch 4 [Questions 1,10; Problems 1,3,5,7] Probanker Competitive Decisions #1 due Oct 17 (noon) October 23, 25 Topics: Depository institutions Reading: Chapters 14 EOC: Ch 14 [Questions 2,12,14,18,20,24] Probanker Competitive Decisions #2 due Oct 24 (noon) Quiz 4 (Oct 25) November 6 Topics: Mutual and hedge funds Reading: Chapter , 17 EOC: Ch 17 [Questions 1,2,5,11,17,19] November 8 Exam 2 over Chapters 2, 3, 4, 14, 15, and 16 November 13, 15 Topic: Pension Funds Reading: Chapter 18 EOC: Ch 18 [Question 3; Problems 1,5,6,7] Probanker Competitive Decisions #3 due Nov 14 (noon) November 20 Topic: Managing credit risk Reading: Chapter 20 EOC: Ch 20 [Problems 1,2,6,8,10,12,13,14] Probanker Decisions #4 due Nov 19 (noon) November 27, 29 Topic: Managing interest rate and insolvency risk Reading: Chapter 22 EOC: Ch 22 [Question 5; Problems 2,5,7,10] Probanker Decisions #5 due Nov 26 (noon) Quiz 5 (Nov 29) December 4, 6 Topic: Using derivatives to manage risk Readings: Chapters 10, 23, 23A, 23B EOC: Ch 10 [Questions 17,18; Problems 2,5,6]; Ch 23 [Questions 2,13,14,17; Problems 3,8,15,16] Probanker Summary Report due December 6 December 11 Comprehensive Final Exam 10:30 am -12:30 pm * Changes, if any, will be announced in class. Finance 326 – Financial Institutions Management

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