ADM 2350 N

Fixed Income Investment

Winter 2016

Professor Dr. Chen GUO

Office DMS 7163
Telephone 613-562-5164 ext 4724
E-Mail guo@telfer.uottawa.ca
Mondays: 11:40 – 12:40 a.m.;
Office Hours Wednesdays: 10:10 – 11:10 a.m.
Thursdays: 5:00 – 6:40 p.m.
Class Location CBY B205
Class Hours Mondays 1:00-2:30, Wednesday 11:30-1:00
DGD Location DMS 1150
DGD Hours Mondays 2:30-4:00 p.m.
Prerequisite(s) ADM 1340, ADM 2303, ECO 1102, ECO 1104
Program of Study BCom Mandatory Course

Course Deliverable Due Date Weight on Final Grade

Test #1 Monday, February 1, 80 min in class 20%

Test #2 Monday, February 29, 80 min in class 20%

Test #3 Monday, March 21, 80 min in class 20%

Final exam TBA 40%

Note: The mark of the worst test will be replaced by the mark of the second worst test.

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TELFER UNDERGRADUATE LEARNING OBJECTIVES:

The course assignments and exams are designed to help each student achieve the Telfer UG1: Understand, Apply,
and Integrate Core Management Disciplines and UG2: Demonstrate Critical Thinking and Decision Making Skills
learning objectives. Students are strongly encouraged to form culturally diverse groups to work on the DGD
problems. This allows each student to achieve the Telfer UG3: Demonstrate Leadership, Interpersonal, and
Communication Skills and UG5: Demonstrate the Ability to Perform in a Culturally Diverse Environment learning
objectives. Throughout the course, the professor will discuss the Telfer UG4: Apply High Standards of Integrity,
Ethics, and Social Responsibility learning objective. The professor will not only relate the concepts of this course to
the financial management of firms but will also show how the concepts can be used personally for home mortgages,
car loans, and retirement planning. This should help each student achieve the learning objective Telfer UG6: Pursue
Self-Development and Exhibit a Commitment for Life-long Learning. The Telfer UG7: Provide Value to the
Business Community in a Chosen Area of Specialization learning objective is normally pursued in some of the
advanced finance courses.

MAJOR COURSE LEARNING OBJECTIVES:

On completion of this course, students should understand:

1. Finance theory, so they can evaluate decisions concerning the investments and the financing of the firm. In
particular, the Discounted Cash Flow (DCF) approach is key to valuing assets and investment projects
based on a forward-looking cash flow perspective.

2. Analytical techniques and their uses, so they can evaluate financial decision situations.

3. The Canadian institutional milieu within which financial decisions must be made.

COURSE DESCRIPTION:
This course presents the fundamentals of financial management of the firm. Principal topics covered in this course
include:

1. Introduction to financial management (forms of business organization, shareholder wealth maximization,

social responsibility, agency theory, cash flows, net present value)

2. Time value of money (also known as discounted cash flow analysis or financial mathematics).

3. Fixed income securities (how investors determine the value of fixed income securities).

4. Risk, return, & CAPM (focus is on the capital asset pricing model, the security market line, and the
estimation of beta).

5. Common shares (how investors determine the value of common shares).

6. Cost of capital (how the firm establishes its marginal weighted cost of capital from long-term sources of
capital — bonds, preferred shares, and common shares).

7. Capital budgeting (how the firm chooses investment projects).

8. Cash flow analysis (how the firm calculates incremental project cash flows).
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METHODOLOGY:

The professor will lecture on the assigned topics. Students are expected to read the text chapters
BEFORE attending class and to participate in class discussions. The professor will also host
exercises in class on the assignment questions (see details below) whenever time allows. Hence,
every student is required to carry (1) the textbook, or at least the copies of the assignment
questions; (2) a calculator (scientific or financial); (3) pens or pencils and scratch papers, to
every class.

TEXTBOOK/COURSE PACKAGE:

William F. Rentz, et. al. Financial Management Theory & Practice, University of Ottawa
Version, Toronto, Ont.: Nelson Education Ltd., 2014 in a softcover package that includes Aplia.

TEXTBOOK LOCATIONS:

Agora Bookstore and Internet Café, 145 Besserer St., Tel. 613-562-4672. (Operated by the
Graduate Student Association and dedicated to offering competitive pricing on new books.)

University Bookstore, Unicentre.

COURSE PLAN

Mon Jan 11, Introduction (Ch 1)

Wed Jan 13, Time Value of Money (Ch 4)

Mon Jan18, Time Value of Money (Ch 4)

Wed Jan 20, Time Value of Money (Ch 4)

Mon Jan 25, Time Value of Money (Ch 4)

Wed Jan 27, Exercises in Class for Test #1

Mon Feb 1, Test #1, 80 minutes in class, covering Ch 4

Wed Feb 3, Bond Valuation (Ch 6)

Mon Feb 8, Bond Valuation (Ch 6)

Wed Feb 10, Bond Valuation (Ch 6))

Reading week Feb 14-20

Mon Feb 22, Capital Asset Pricing Model (Ch 7)

Wed Feb 24, Exercises in Class for Test #2

Mon Feb 29, Test #2, 80 minutes in class, covering Ch 6

Wed Mar 2, Capital Asset Pricing Model (Ch 7)

Mon Mar 7, Stock Valuation (Ch 8)

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Wed Mar 9, Stock Valuation (Ch 8)

Mon Mar 14, Cost of Capital (Ch 9)

Wed Mar 16, Exercises in Class for Test #3

Mon Mar 21, Test #3, 80 minutes in class, covering Ch 7 and Ch 8

Wed Mar 23, Cost of Capital (Ch 9)

Mon Mar 28, Easter, no class

Wed Apr 30, Capital Budgeting (Ch 10)

Mon Apr 4, Advanced Capital Budgeting Decisions (Ch 11)

Wed Apr 6, Advanced Capital Budgeting Decisions (Ch 11)

Mon Apr 11, Final Review and in class Exercises

ASSIGNMENT QUESTIONS

Chapter 4: 1, 2, 3, 4, 5, 6, 7, 8, 13, 14, 17, 20, 26, 36.

Chapter 6: 1, 2, 3, 7, 8, 10, 13, 15, 20, 24, 25

Chapter 7: 1, 2, 3, 6, 7, 11, 12

Chapter 8: 3, 5, 9, 12, 13, 18, 19, 20

Chapter 9: 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 14, 15, 16

Chapter 10: 1, 2, 5, 6, 7, 9, 16, 18, 23

Chapter 11: 2, 3, 4, 5, 6, 8, 9, 10, 11, 14

Note:

The problem numbers refer to the end of chapter problems of the textbook. Brief answers on the
odd-numbered problems can be found in Appendix A of the textbook. The even-numbered
problems are for the students to build confidence on solving problems; hence, the answers will
not be provided. Students are required to practice every assigned problem. Students with
difficulties are encouraged to attend the DGD, where the teaching assistant will coach the
students to work out some of the bold-faced problems.
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DGD PLAN FOR ADM 2350 N

Date Topic Problems

Mon, Jan 18 Time Value of Money (Ch. 4) 5, 7

Mon, Jan 25 Time Value of Money (Ch. 4) 17, 26

Mon, Feb 1 Time Value of Money (Ch. 4) 36

Mon, Feb 8 Bond Pricing (Ch 6) 15, 20

Reading Week No DGD

Mon, Feb 22 Bond Pricing (Ch 6) 24, 25

Mon, Feb 29 CAPM & SML (Ch 7) 11, 12

Mon, Mar 7 Stock Valuation (Ch 8) 18, 19

Mon, Mar 14 Stock Valuation (Ch 8) 20

Mon, Mar 21 Cost of Capital (Ch. 9) 14, 16

Mon, Apr 4 Capital Budgeting (Ch. 10) 18, 23

Mon, Apr 11 Advanced Capital Budgeting (Ch 11) 6, 10, 14

Note:

The purpose of the DGD is NOT for the students to take notes from the teaching assistant (TA)
or just to get some specific answers. It is for the TA to coach the students to solve some of the
assignment questions. The students should participate in the exercises as guided by the TA.

The TA may not have to cover all the problems in the above table, and may cover some
assignment questions not listed in the table. The TA may cover a problem of the next DGD in the
current DGD, or may continue to finish a problem in the previous DGD. The TA will not have to
provide detailed answers to every problem.

Remember that the TA is your coach and helper. He/she will share his/her learning experience
with you. The TA may not satisfy every student because of limited time. The students who need
further help should see the professor in office hours, or raise concerns in class.
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COURSE ATTENDANCE

The university requires all the students to attend classes regularly. To enforce the attendance, the
professor will count the students in every 1.5-hour session. Because course registration may not
be finalized in the first two weeks, the attendance counting will start on the fifth session. The
professor will project the student list on the screen while counting the name. The student should
raise hand and verbally answer “Yes”, Yeah”, or “Here”. Upon receiving a “Yes” answer, the
professor will mark a “Y” on the list. It is the student’s responsibility to watch on the screen to
ensure that the “Y” is marked beside his/her name, and to remind the professor immediately if
the “Y” is not marked. The professor will not accept any argument after the attendance counting
on the session ends. In a session with test, the attendance counting will be skipped because the
submitted work is evidence of attendance. For any missed test, the attendance will be counted as
1 missing, even if it is for medical reason.

Students are allowed to miss up to 6 sessions (1.5 hours each session). There is no penalty for
missing less than or equal to 6 sessions. However, anyone missing more than 6 sessions will not
be allowed to write the final exam, and will be graded F if the student fails to withdraw from the
course before the deadline. The professor will not inform the students on how many sessions
they have missed. It is the responsibility of the student who could not remember how many
sessions missed to check with the professor.

Please do not send email to the professor to explain why a session was or is to be missed for
whatever reason, because no explanation is required and no excuse is acceptable. Some students
in the past have argued that they miss classes because of legitimate activities in the university.
However, these activities should not seriously affect the student’s learning on this particular
course. The students who cannot ensure attendance should switch to suitable section of the
course.

FORMAT OF TESTS AND EXAM

All the tests and the final exam are of closed book. Necessary formulas will be provided by the
professor.

It is the responsibility of the student to carry a calculator, either scientific or financial, to all the
tests and the final exam. Student should know how to use his/her own calculator, and to set the
precision with at least 6 decimals.

MARKING RULES AND DISPUTE SETTLEMENT

The tests will be marked by the teaching assistant (TA) based on the standard solutions provided
by the professor. The TA will offer partial credit when an answer is wrong, but the intermediate
steps/analysis/arguments are partially correct. The TA will try to offer the partial credit as
consistently as possible, but the partial credit is, by its nature, discretionary. Students should
appreciate the partial credit and should not argue further on the fairness of the partial credit.
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The professor will not post answers to the tests. Student who is unsatisfied with the marking
must find correct answers by themselves to determine if the marking is unfair, before seeking the
professor for correction.

Student should only bring his/her own papers to the professor. The TA could have mistakenly
marked a wrong answer as correct for some students, but the TA’s error cannot alter the marking
key provided by the professor. A student who received mark for a wrong answer would be
“lucky”. If the lucky student lent his/her paper to another student for the latter to bargain with the
professor, the professor will retake the mark of the lucky student.

Because the tests will be returned to the students, a few students have, in the past, altered the
answers then accused the TA for marking errors. For examples, some student argued that “my
answer was written on the corner (or next page) but the TA failed to see”, “I meant that my
answer for part (b) is actually for part (a) and vice versa”, “I wrote two answers but the TA took
the wrong one”.

To avoid controversies, student must write his/her answers within the designated area. If the
answer has to be written in different area, the student must circle the relevant area and clearly
indicate that “this part is my answer to question/sub-question xxx” If nothing is clearly indicated,
the TA will not look every corner for possible answer. The answer to each question/sub-question
must be unique. If there are two answers for a question, the less correct one will be counted.

If a student wants to argue the marking on the basis that his/her answers are overlooked by the
TA, he/she MUST directly file complaints with the undergraduate office, because the professor
cannot judge whether the answers were originally there or added/altered later.

MISSED TESTS

There is no makeup test. If one test is missed for medical reason, a medical note is required. In
this case, the mark on the missed test will be equal to the lower mark of the other two tests.
Without the medical note, the 20% credit will be lost. For reasons other than medical, the student
has to report to the undergraduate office to get approval. If another test is missed for medical
reason and a medical note is given to the professor, the mark of the only test will be doubled, and
the final exam will count for 60%. If all three tests are missed, the student must withdraw from
the course even if every missing is for medical reason.
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Beware of Academic Fraud

Academic fraud is an act committed by a student to distort the marking of assignments, tests,
examinations and other forms of academic evaluation. Academic fraud is neither accepted nor
tolerated by the University. Anyone found guilty of academic fraud is liable to severe academic
sanctions.

Here are a few examples of academic fraud:

• engaging in any form of plagiarism or cheating;
• presenting falsified research data;
• handing in an assignment that was not authored, in whole or in part, by the
student;
• submitting the same assignment in more than one course, without the written consent of
the professors concerned
In recent years, the development of the Internet has made it much easier to identify
academic plagiarism. The tools available to your professors allow them to trace the exact
origin of a text on the Web, using just a few words.

In cases where students are unsure whether they are at fault, it is their responsibility to consult
the University’s Web site at the following address, where you will find resources, tips and tools
for writing papers and assignments:
http://web5.uottawa.ca/mcs-smc/academicintegrity/home.php

Persons who have committed or attempted to commit (or have been accomplices to)
academic fraud will be penalized. Here are some examples of the academic sanctions,
which can be imposed:
• a grade of “F” for the assignment or course in question;
• an additional program requirement of between three and thirty credits;
• suspension or expulsion from the School.

Please be advised that professors have been formally advised to report every suspected case of
academic fraud. In most cases of a first offence of academic fraud, the sanction applied to
students who have been found guilty is an “F” for the course with an additional three credits
added to their program requirements. Repeat offenders are normally expulsed from the School of
Management.

Finally, the Telfer School of Management asks that students sign and submit with their
deliverables the Personal Ethics Agreement form. Two versions of this form exist: one for
individual assignments, and one for group submissions. Assignments will not be accepted or
marked if this form is not submitted and signed by all authors of the work. We hope that by
making this personal commitment, all students will understand the importance the School places
on maintaining the highest standards of academic integrity.
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Personal Ethics Statement Concerning Telfer School Assignments

Group Assignment:

By signing this Statement, I am attesting to the fact that I have reviewed not only my own work,
but the work of my colleagues, in its entirety.

I attest to the fact that my own work in this project meets all of the rules of quotation and
referencing in use at the Telfer School of Management at the University of Ottawa, as well as
adheres to the fraud policies as outlined in the Academic Regulations in the University’s
Undergraduate Studies Calendar. http://www.uottawa.ca/academic-regulations/academic-
fraud.html

To the best of my knowledge, I also believe that each of my group colleagues has also met the
rules of quotation and referencing aforementioned in this Statement.

I understand that if my group assignment is submitted without a signed copy of this Personal
Ethics Statement from each group member, it will be interpreted by the Telfer School that the
missing student(s) signature is confirmation of non-participation of the aforementioned
student(s) in the required work.

______________ _______________
Signature Date
________________________________ _______________
Last Name (print), First Name (print) Student Number

______________ _______________
Signature Date
________________________________ _______________
Last Name (print), First Name (print) Student Number

______________ _______________
Signature Date
________________________________ _______________
Last Name (print), First Name (print) Student Number

______________ _______________
Signature Date
________________________________ _______________
Last Name (print), First Name (print) Student Number

______________ _______________
Signature Date
________________________________ _______________
Last Name (print), First Name (print) Student Number
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Personal Ethics Statement

Individual Assignment:

By signing this Statement, I am attesting to the fact that I have reviewed the entirety of my
attached work and that I have applied all the appropriate rules of quotation and referencing in use
at the Telfer School of Management at the University of Ottawa, as well as adhered to the fraud
policies outlined in the Academic Regulations in the University’s Undergraduate Studies
Calendar. http://www.uottawa.ca/academic-regulations/academic-fraud.html

________________ ______________
Signature Date

________________________________ ______________
Last Name (print), First Name (print) Student Number