Principles of finance syllabus

These previously recorded lectures will be posted to the course Canvas site, along with the accompanying Power Point slides, on the afternoon of the dates listed in the course calendar b

MGMT S-2000 Harvard University Extension School Principles of Finance Summer, 2021

Lectures will be available for viewing in accordance with the schedule in the “Course Calendar” below.

Professor: Bruce Watson

bwatson@fas.harvard.edu

Teaching Assistants: Sarah Ledoux (Head TA)

sarah.mgmte2000@gmail.com Deals with any issues pertaining to Canvas, course logistics, or course policy

Rob Munger

rob.mgmte2000@gmail.com Sections (On-line and Recorded) Days and times TBA

This course provides an introductory survey of the field of finance It examines the agents, instruments, and institutions that make up the financial system of the modern economy, such as bonds, the stock market, derivatives, and the money market Along the way, standard concepts and tools of financial analysis are introduced: present discounted value, option value, and the efficient markets hypothesis Recent developments in the field in particular, the application of psychology to financial markets (called behavioral finance) also are discussed The course is designed to equip students with the background and tools they need to make their own financial decisions with greater skill and

confidence Specifically, we will see how insights from academic finance can inform and improve students’ own investing decisions The course assumes no prior knowledge of finance or investments Prerequisite: High school algebra

Please note:

This course is part of the Harvard Summer School's Distance Education Program Lectures for this term were recorded when this course was given on the Harvard campus during the Fall Term of 2019 These previously recorded lectures will be posted to the course Canvas site, along with the

accompanying Power Point slides, on the afternoon of the dates listed in the course calendar below While the lectures for this course are pre-recorded, other aspects of the course are "live" and are comparable to those of other Summer School courses (where a lecture is presented twice per week in a lecture hall at Harvard.) This means that you are responsible for homework and any exams just as you would be in any other course where you attend weekly lectures in person Sections will be held each week as detailed above

Academic Honesty

Harvard Summer School takes matters of academic honesty very seriously While you may

discuss assignments with your classmates and others, make sure that any material you submit is your

own work Use of old course materials, including problem sets or exams from online sources, is strictly prohibited unless made available to all students by the instructor

Examples of unacceptable conduct include plagiarism, copying and pasting answers from the internet,

downloading answers to problem sets or exams from other students or the internet, collaborating on examinations, etc

Collaboration on problem sets is allowed, even encouraged, but there will be absolutely no allowance for any collaboration on exams Any suspected collaboration during an exam, or consultation via text, email, or the web, will result in a full report to the Administrative Board of the Summer School, with subsequent investigation and disciplinary action

You are responsible for understanding Harvard Summer School policies on academic integrity

(http://www.summer.harvard.edu/policies/student-responsibilities) Not knowing the rules,

misunderstanding the rules, running out of time, or being overwhelmed with multiple demands are not acceptable excuses

To support your learning about academic integrity rules, please visit the Resources to Support

Academic Integrity: ( http://www.summer.harvard.edu/resources-policies/resources-support-academic-integrity)

where you will find links to the Harvard Guide to Using Sources and two free online 15-minute

tutorials to test your knowledge of academic citation policy The tutorials are anonymous

open-learning tools

Accessibility

The Summer School is committed to providing an accessible academic community The Accessibility Office offers a variety of accommodations and services to students with documented disabilities Please visit http://www.summer.harvard.edu/resources-policies/accessibility-services for more

information

All accommodations need to go through the Accessibility Services Office Separate arrangements

for students who approach individual instructors with a disability issue cannot be made

Course Evaluation

Your constructive assessment of this course plays an indispensable role in shaping education at

Harvard Upon completing the course, please take time to fill out the online course evaluation

Course Requirements

Exams

There will be two exams for the course, a midterm and a final Both will be taken on-line on the course Canvas site

The midterm will be available on Canvas starting at 6:30 PM (US Eastern Time) on Thursday, July 15 Students will have a 24-hour window, from 6:30 PM (US Eastern Time) on Thursday, July 15 to 6:30

PM (US Eastern Time) on Friday, July 16, in which to complete the exam The exam is one hour long,

and, once begun, must be taken in one sitting It cannot be partially finished, saved, and then

completed later.

The midterm will cover all the material presented in lecture from the first lecture, posted on June 21, to the lecture on bonds, posted on July 8

The final will be available on Canvas starting at 6:30 PM (US Eastern Time) on Thursday, Aug 5 Students will have a 24-hour window, from 6:30 PM (US Eastern Time) on Thursday, Aug 5 to 6:30

PM (US Eastern Time) on Friday, Aug 6, in which to complete the exam The exam is two hours long,

and, once begun, must be taken in one sitting It cannot be partially finished, saved, and then

completed later.

The final will be cumulative, and cover all the material presented in lectures, from the first lecture

posted on June 21 to the last lecture on futures, posted on July 30 However, it will be weighted toward material presented since the midterm

Detailed instructions on both exams will be sent to students well in advance of the exam dates

Please Note:

 It is your responsibility to plan your summer schedule, and especially any travel, around exam dates In particular, the date of the final exam is determined by the Registrar and cannot be changed for any reason Requests to take the final on a different day, including requests for a make-up final, involve a formal appeal process through the Summer School Examination Committee

 No makeup midterms will be given

 Please see the section below on “Grading” to understand how your semester grade will be

determined if you must miss the midterm for any reason.

In order to assure the integrity of the exams, they will be proctored through software called Proctorio

The Summer School offers remote proctoring integrated into the course Canvas site, and allows you to take exams wherever you are most comfortable There is no need to take the exams in the lecture hall, and, for distance students, there is no need to hire or pre-schedule an in-person proctor

Proctorio requires you to use a computer outfitted with an external or built-in webcam and

microphone, Google Chrome browser, and a stable internet connection (LTE hotspots won’t work)

More information about setting up your computer and an opportunity to test Proctorio will be provided

long before the scheduled exams

Problem Sets

Problem sets will be completed on Canvas, the same on-line platform on which the midterm and final exams will be taken Full instructions concerning the Canvas platform will be provided well before the first problem set is assigned All students will be assigned to a grader who will grade their problem sets throughout the semester

There will be four problem sets assigned during the term All four problem sets will be available on Canvas on the dates indicated in the course calendar below Due dates are also listed in the course calendar below, and as well as in Canvas

Problem sets must be completed on Canvas before 11:59 PM, Eastern U.S time, on the date the

problem set is due Note: If you live in a different time zone, Canvas will automatically update the

due date and time on all assignments to reflect the date and time in your zone

We cannot accept late problem sets for any reason However, to compensate for this policy, the

lowest of their four problem set scores will be dropped from each student’s semester grade calculation

If you cannot get a set done some week, that can be the set that gets dropped

Our grading policy is designed with the interests of all students in mind As a teaching staff, we have

to be fair to those who submit their problem sets on time, often in spite of difficult situations We drop the lowest problem set score to offer flexibility to those who encounter situations beyond their control,

or who just had a bad week

With so many students in so many different circumstances, we have found the best way to be fair to everyone is to lay these ground rules out well in advance and follow them without exception

Re-grade Requests

Students can contact the graders with any questions or concerns about how their problem sets or midterm have been graded However, you must submit requests for problem set or midterm re-grades

no later than seven days after your work has been returned In order to allow for a timely and

orderly response to your request, we must adhere to this policy without exception We cannot respond

to re-grade requests made after these deadlines

Graduate Project

(Note: This requirement applies only to students registered for graduate credit)

Students registered for graduate credit must submit three 1 – 2 page papers, written on Canvas,

applying what they have learned in class to a relevant news item that they find in the media—

newspapers, magazines, or on-line

Due dates for the papers are as follows: July 6, July 26, and Aug 4

Grading

Your semester grade will be based on the higher of the two following weightings:

40% final exam

So, if you do poorly on the midterm, or are unable to take it for any reason, your final exam will

automatically be reweighted to be 70% of your semester grade, with the average of your three highest problem set scores constituting the remaining 30% We will make these calculations automatically for each student—you don’t have to “opt in” or “opt out” of one or the other weighting We will make certain you receive the highest grade to which you are entitled

Once we compute your semester weighted average, your letter grade will be determined in two ways If there’s any difference in the result, we’ll give you the higher of the two letter grades which result.

 Curve

In the first system, semester letter grades will determined by a curve The nature of a curve is that your grade is based on your performance relative to all other students in the class It does not involve an

“absolute standard,” e.g., 90 – 100 = A, 80 – 90 = B, etc., which you may be used to from some other courses

With a curve, your grade is based on your percentile rank in the class, i.e., the percentage of students in the class who scored below you If you are in the 60th percentile, for example, that means that 60% of students had scores equal to or below yours, while 40% of students had scores above yours

The Curve Used in Assigning Your Letter Grade for the Semester

To determine your semester grade, we will employ the (very generous) curve given below:

Letter Grade Percentile Rank Range of Letter Grade

A 83rd Percentile – 100th Percentile

A- 63rd Percentile – 83rd Percentile

B+ 44th Percentile – 63rd Percentile

B 24th Percentile – 44th Percentile

B- 10th Percentile – 24th Percentile

C+ 7th Percentile – 10th Percentile

C 5th Percentile – 7th Percentile

C- 3rd Percentile – 5th Percentile

D 2nd Percentile – 3rd Percentile

E/F 0th Percentile – 2nd Percentile

For example, say that your higher semester weighted average is 82.5%, and that this puts you in the

57th percentile overall Applying the curve, your semester grade would be a B+

 Absolute Scale

In the second calculation, grades will be determined by the standard curve you may be familiar with from high school In this approach, your letter grade is based on your total points as a percentage of the total possible points for the semester Here is the scale:

A 93.0%

E/F 0.0%

Extending the example above, if your higher weighted average for the semester were 82.5%, according

to the absolute scale, your semester grade would be a B-

Since the curve results in a letter grade of B+, but the absolute scale results in a grade of B-, the grade reported to the registrar would be B+, the higher of the two

Note for graduate students: Your semester grade, as calculated above, will be lowered by half a letter grade for each of the three graduate papers that you do not submit For example, if you fail to submit one of the papers, your grade in the example above would be lowered from a B+ to a B.

Readings

Most of the readings listed in the Course Calendar below are from the textbook: Financial Markets and Institutions, 9th edition, by Frederic Mishkin and Stanley Eakins

However—PLEASE NOTE: The book is not required!!

You will find that I don’t follow it closely at all Many students have done perfectly well in the class without ever buying the book Others find it useful to reinforce material we have covered, or to extend their knowledge of various subjects

Some of the topics we cover do not appear in the book Conversely, some of the reading listed below

is for background, and will not be covered explicitly in class

You should consider the textbook to be most useful as a reference, or as an additional source of review

for material we have presented in class You will not be responsible—on problem sets or exams—

for material in the book that we have not covered in class

If you have purchased the 8th edition, the international edition, or a used copy of an even earlier edition

of Mishkin and Eakins, you should still find it useful However, the page numbers given below refer to the latest, 9th, edition

Relevant newspaper and magazine articles will also be placed on the “Readings” page of the course web site when relevant

Student Profiles

Every summer, the course enrolls people from an amazing variety of backgrounds and walks of life And, the reasons for taking the class are almost as diverse as students’ backgrounds In order to share a little of their life stories with their classmates, students are encouraged to submit a few lines about themselves to the “Student Profiles” discussion board on the course website

Please note that this is completely voluntary, and also that the only people who will be able to view what you submit will be your classmates and the teaching staff—nobody else Just submit a few

lines about your job, background, interests, and/or why you have decided to study finance

Even if you decide not to submit a profile, you will enjoy reading about some of your fellow students