Albert E. DePrince, Jr.
Director, Business and Economic Research Center
Professor of Economics and Finance
Course Description and Objectives
To provide an understanding of the role of financial institutions and financial markets in today's economy. In terms of markets, students are provided with an understanding of the determinations of general level of interest rates as well as the relationships among the many interest rates in today's complex financial system. Special attention is given to exchange rates as part of the College's efforts to globalize its curriculum. Additionally, derivative instruments receive special attention due to their explosive growth and their unique forms of risks. Risks inherent in financial decisions are stresses for both instruments and institutions. The course seeks to provide a general understanding of the roles, characteristics, and operation of financial institutions, and to provide an understanding of the evolutionary forces at work within the sector, the contemporary challenges that these institution face, and the various approaches to meeting those challenges. With the blurring of distinction among the various traditional descriptions of financial institutions, this course will discussion of the various traditional financial institutions within the context of business lines within a broader financial institution. This is because size is not as important as products. Simply stated, small institutions, to compete effectively with large institutions, will need to offer similar key products. For example, even locally, the smallest of banks offers products beyond traditional banking services, such as mutual funds and brokerage services.
Course Outline
Topic 1: Overview of the Financial System
Financial Institutions and Market (Chapters 2 and 3)
Topic 2: Interest Rates
Valuing Cash Flows and Calculating Total Returns (Chapter 4)
Students are encouraged to review the lecture slides for this topic prior to class. Valuing the various cash flows has been covered in
the this course's prerequisites. This lecture will briefly review valuation of various financial instruments and focus more heavily on
returns (both expected and realized).
The General Level of Interest Rates (Chapter 5)
The Structure of Interest Rates (Chapter 6)
Topic 3: Financial Markets
Fixed Income Markets (Chapter 8)
Equity Markets (Chapter 9)
Mortgage Markets (Chapters 10 and 17)
Derivatives (Chapter 11)
Foreign Exchange (Chapter 12)
Topic 4: Financial Institutions-The Evolution
Financial Conglomerates (Chapter 21)
Financial Modernization Act (Readings to be assigned)
Topic 5: Financial Institutions-Business Business Lines
Commercial Bank Operations (Chapter 13)
International Banking (Chapter 15)
Insurance Products (Chapter 20)
Pension Products (Chapter 20 )
Securities Firms (Chapter 19)
Investment Companies-Mutual Funds (Chapter 21) and Hedge Funds (Chapter 19)
Finance Companies (Chapter 18)
Topic 5: Management and Profitability of Financial Institutions
Banking (Chapter 14)
Other Financial Products (Readings to be assigned)
Topic 5: Regulation
Regulations of Financial Institutions (Chapter 16)
Topic 6: Contemporary Issues
End of Semester Wrap-Up Lecture (No reading assignment)
Students will be responsible for all chapters, whether or not they are covered in class. Also, it is the student's responsibility to review chapters listed as review chapters.
Activities of Students
Exams
There will be three exams of 75 minutes in duration. The date for each test is listed below. This notification allows students to plan
according. If there is any change to the exam schedule, it will be announced well in advance of the exam. All exams (including the
final exam) will be a combination of objective questions, short answer essay questions, and problems involving computational
solutions. Make-up tests will be given only in extreme circumstances. Any make-up test must be completed before the exams are
returned to the class. Approval for the make-up test must be granted before the time of the scheduled test.
Exam 1
September 27
Exam 2
November 8
Final Exam
You should plan on a comprehensive final exam. The material covered since the third exam will be emphasized on the final exam;
however, it will also cover material from the earlier parts of the course. Toward the end of the course, I will suggest areas that might
be emphasized on the final. These areas of emphasis on the final will important "take away" topics, i.e., areas that I hope that you
would remember in the years ahead. However, I reserve the right to alter the final exam, depending on how the term proceeds. You
will be given adequate notice of any change in the final's format.
Practice Exercises
Various practice exercises will be provided through this web site, along with an answer key. Their purpose is reinforce class topics.
These exercises will not be collected and will not be graded. However, students in this class are strongly encouraged to complete the
exercises. It is unlikely that reasonable grades will be secured on the problem portion of the exams, its students do not master the
concepts in these practice exercises.
Quizzes
There will be six to twelve quizzes. These will be given on Wednesdays, and they will be based on recently covered material. In
most cases, these will be multiple choice questions. They will be (1) designed to reinforce teaching point (2) identify weakness that
need to be strengthened before the exam. The will likely be ten-to-fifteen minutes in length. The lowest quiz grade will be dropped.
Attendance
It is strongly recommended that students attend class. Though there is no penalty for missed classes, exam questions will be drawn
from the class lectures as well as the readings. Students will be responsible for both the lectures and the readings, even if they choose
not to attend class on a regular basis. Excessive absences will, however, result in the student's omission from any adjustment to the
official grading scale at the end of the course.
Evaluation Procedures
In computing the final grade, weights for the tests and final exam are as follows:
Each of the two exams: 25%
Quizzes: 15%
Final Exam: 35%
Course grades will be based on the newly established +/- grading scale.
References and Texts
Required Text
Financial Institutions, Markets and Money, Seventh Edition, by David Kidwell, Richard Peterson, and David Blackwell
Additional Required Readings
Students are required to regularly read the financial section of a reputable newspaper (The Wall Street Journal). Students should note
that significant developments in the area o f financial institutions and markets will be testable material whether or not they are
covered in class. From time to time, selected additional readings will be assigned. Typically, these readings will be provided through
the course web site.
Other Information
Office Information
Location: BAS N214
Telephone: 615-898-5995
E-mail: deprince@frank.mtsu.edu
Home page: http://www.mtsu.edu/~deprince
Office Hours
For the Fall 2000 term, office hours are as follows:
Monday: 9:00-11:30 AM
Tuesday: 9:00-11:30 AM
Wednesday: 9:00-11:30 AM
Thursday: 9:00-11:30
By appointment
Prerequisites
Fin 300 or Fin 301 and Econ321 is a prerequisite for this course.
Calculator
It is highly recommended that all students have and understand the operation of a financial calculator. The HP-10B is the preferred
calculator.
Disabilities
Any student with a disability who needs accommodation for this class should talk with the instructor and/or the campus disability
issues coordinator. This should be done as soon as possible.
Syllabus Changes
The instructor reserves the right to adjust the syllabus as the course progresses. Any such changes will be distributed to the class.
Lecture Slides
Lecture slides will be provided to the class through my Web site. Every effort will be made to load them at least one hour before
class. These are provided as a courtesy to the students. These copies are for currently enrolled students and in not way should there
by any further distribution of the slides. In no way should students view provision of copies of the slides as an obligation on my part.
Also, student should not view it as my responsibility to correct technical problems that students may face downloading those slides.
| Version: 10.0 | Updated: 8/15/00 |