Quote from Siri…. “ I hate the way they teach Math in the school. All the teacher does is put lots of examples on the board for the students to memorize. He does not explain the theory so that we could apply the theory to ANY numbers rather than memorizing 10 problems without understanding.
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B. College of Business Policies and Procedures, which will be enforced.
To ensure that every student, current and future, who takes courses in the Boccardo Business Center has the opportunity to experience an environment that is safe, attractive, and otherwise conducive to learning, the College of Business at San José State has established the following policies:
Eating and drinking (except water) are prohibited in the Boccardo Business Center. Students with food will be asked to leave the building. Students who disrupt the course by eating and do not leave the building will be referred to the Judicial Affairs Officer of the University.
Students will turn their cell phones off or put them on vibrate mode while in class. They will not answer their phones in class. Students whose phones disrupt the course and do not stop when requested by the instructor will be referred to the Judicial Affairs Officer of the University.
In the classroom, faculty will allow students to use computers only for class-related activities. These include activities such as taking notes on the lecture underway, following the lecture on Web-based PowerPoint slides that the instructor has posted, and finding Web sites to which the instructor directs students at the time of the lecture. Students who use their computers for other activities or who abuse the equipment in any way, at a minimum, will be asked to leave the class and will lose participation points for the day, and, at a maximum, will be referred to the Judicial Affairs Officer of the University for disrupting the course. (Such referral can lead to suspension from the University.) Students are urged to report to their instructors computer use that they regard as inappropriate (i.e., used for activities that are not class related).
Faculty will make every reasonable effort to foster honest academic conduct in their courses. They will secure examinations and their answers so that students cannot have prior access to them and proctor examinations to prevent students from copying or exchanging information. They will be on the alert for plagiarism. Faculty will provide additional information, ideally on the green sheet, about other unacceptable procedures in class work and examinations. Students who are caught cheating will be reported to the Judicial Affairs Officer of the University, as prescribed by Academic Senate Policy S98-1.
C. My Class Room Policies1. Due to assistance in adhering to COB policies and to the demonstrated – by past classes – learning/attendance benefits it affords, classes will be run as back to back sessions with the “break” at the end. Thus the classes will run as follows:1:30 to 3:50/55 (with “break” from 3:55 to 4:15)5:30 to 7:50/55 (with “break” from 7:55 to 8:15)2. Class will go full time. If something runs shorter than anticipated, an unscheduled class exercise that will further enhance learning will be added 3. Short courteous “bio” breaks are allowed during the class EXCEPT during exams.4. Courtesy to your class mates and the professor requires on-time arrival and informing the professor of early departures or missing class ahead of time (due to in class group exercises)
Exam Dates1. Feb 21 (Ch 1-8)2. Mar 21 (Ch 9-14, 25)3. Final Date, Wed May 23 (do NOT book flights earlier, no exceptions will be made)
Jeopardy DateMay 2
The basic goal of management: to create stock-holder value (measured by stock price!!!)
Agency relationships get in the way:
1.Stockholders versus managers
2.Stockholders versus creditors
An agency relationship arises whenever one or more individuals, call (1) hires another individual or organization, to perform some service (2) delegates decision-making authority to that agent.
Would going public in an IPO increase or decrease agency problems?
A manager might inflate a firm's reported earnings or make its debt appear to be lower if he or she wanted the firm to look good temporarily. For example just prior to exercising stock options or raising more debt.
If the firm is publicly traded, the stock price will probably drop once it is revealed that fraud has taken place. If private, banks may be unwilling to lend to it, and investors may be unwilling to invest more money.
What kind of compensation program might you use to minimize agency problems?
Why might someone interviewing for an entry level job have a better shot at getting a good job if he or she had a good grasp of financial management?
Managers want to hire people who can make decisions with the broader goal of corporate value maximization in mind because investors are forcing top managers to focus on value maximization.
r = expected rate of return.
rA = 0.10(-22%) + 0.20(-2%)
+ 0.40(20%) + 0.20(35%)
+ 0.10(50%) = 17.4%.
Assume a two-stock portfolio with $50,000 in each
Calculate rp and p.
rp is a weighted average:
rp = wiri
i = 1
135% ; Large20%.
Company Specific (Diversifiable) Risk
Stand-Alone Risk, p
102030 40 2,000+
# Stocks in Portfolio
Market risk is that part of a security’s stand-alone risk that cannot be eliminated by diversification.
Firm-specific, or diversifiable, risk is that part of a security’s stand-alone risk that can be eliminated by diversification.
Can an investor holding one stock earn a return appropriate to its risk?
How is market risk measured for individual securities?
What is the CAPM from 170?
What are the assumptions
of the CAPM?
How are betas calculated?
r1 = 8.0% + (7%)(1.29)
= 8.0% + 9.0%= 17.0%.
rM= 8.0% + (7%)(1.00)= 15.0%.
r2.= 8.0% + (7%)(0.68)= 12.8%.
rT-bill= 8.0% + (7%)(0.00)= 8.0%.
r3= 8.0% + (7%)(-0.86)= 2.0%.
Impact of Inflation Change on SML
of Return r (%)
I = 3%
Impact of Risk Aversion Change
in risk aversion
Required Rate of Return (%)
rM = 18%
rM = 15%
RPM = 3%
The SML Equation
ri = rRF + (RPM) bi
Illustration of beta calculation
Year rM ri
ri = -2.59 + 1.44 kM