DEPARTMENT OF ECONOMICS AND FINANCE
FINANCE
4510
TR
BU AUD
SPRING
2005
Instructor: Professor
Sherrill Shaffer
Office: 229
Ross Hall
Telephone: Office: 766-2173, Secretary:
766-2175, Department: 766-2178
Office Hours: M
E-Mail: Shaffer@uwyo.edu
Fax: 766-5090
Web Page w3.uwyo.edu/~shaffer or http://business.uwyo.edu/people/Shaffer/default.htm
Course
Prerequisites: FIN
3250,COSC 1200, and advanced business student.
Course Objective:
The purpose of this course is to convey a basic understanding of some of the
major challenges, concepts, tools, and constraints concerning the management of
depository institutions in today's environment.
The material presented will contribute toward preparation for a career
in banking or bank regulation.
The individual exams and homework
assignments will contribute to the overall semester grade as follows:
Item Percent
of final grade
Midterm exams (2) 2 x 25% = 50%
Homework
(3) 5 x 5% = 25%
Final 25%
(see
also “Attendance Policy”)
Students will receive letter grades
based on the following scale. Individual
exam scores will not necessarily be curved.
Midsemester and final grades may be curved depending on student
performance, but the following distribution is guaranteed:
Percent Grade
90+ A
80-89 B
70-79 C
60-69 D
<60 F
No extensions will be granted for
this course. Late assignments will be
docked as explained below.
Exams. There will be two
midterms exams plus a non-cumulative final.
Questions may include multiple choice, true/false, short answer essay,
fill-in-the-blank, numerical problems, or some combination thereof. Financial calculators or other calculators
may be used during exams and are strongly recommended. Students may not share calculators during
exams. Midterms are scheduled in the
calendar below; the final exam is scheduled according to university policy and
will not be offered at any other time unless students have more than two final
exams in a 24-hour period (and then only after consulting the Registrar). Students should make end-of-semester travel
plans accordingly.
Projects. Five homework
projects will be assigned. Assignments
are due at the beginning of class on the due date and late assignments will be
penalized as follows:
1.
If full or partial
solutions are discussed in class, or graded assignments are returned to other
students, the assignment will not be accepted late and a score of zero will be
recorded.
2.
If no Solutions have
been presented by the professor, the late assignment will be accepted subject
to a 10 percent penalty each day it is late, including weekends. Assignments may also be docked if they are
turned in after the beginning of a class on the due date. If the professor is not available to receive
late assignments, they must be turned in at the departmental office and stamped
with the date.
3. No late assignments will be accepted after
Required Materials:
1. Text: Timothy W. Koch and S. Scott
MacDonald, Bank Management, Fifth
Edition, Dryden Press, 2003.
2. Ken Spong, Banking Regulation Fifth Edition, Federal Reserve Bank of
3. Course Packet, available at bookstore.
Recommended reading:
1.
The Wall Street Journal or the American Banker, as
available in Coe Library. Articles may
occasionally become topics for short discussions and will strengthen your
practical understanding of the concepts presented in class.
2. Possible supplemental readings to be
distributed in class.
Attendance Policy:
All students must take examinations
at the assigned times. No make-ups will
be given except in cases of extreme personal hardship, ill health, or
participation in a university-sponsored sporting event, and then only at the
discretion of the professor and only if the professor has been notified well in
advance of the examination. Such cases
must also be verified in writing (for example, by a doctor or appropriate
university official). In the rare
instance when a make-up is granted, it may follow a different format from the
original exam, such as all essay. In any
other case, a missed exam will result in a grade of zero.
Academic Dishonesty:
UNIREG 802, Revision 2, defines academic dishonesty as
“an act attempted or performed which misrepresents one’s involvement in an
academic task in any way, or permits another student to misrepresent the
latter’s involvement by assisting the misrepresentation.” Academic dishonesty will not be tolerated in
this class; any instances will be referred to the university’s established
procedure for judging such cases, with severe penalties as found appropriate.
Group Work
Guidelines:
All
exams and homework assignments in this class must be done individually.
There
will be no group projects.
Disclaimer:
Subsequent changes may be made to
any aspect or detail of this Syllabus if and when necessary. Any changes will be announced in class as
soon as practical. In particular, because
certain topics may require more or less time than indicated on the schedule, or
because guest speakers may occasionally be invited as available, the schedule
of reading assignments is only approximate and may be revised from time to time
as announced in class by the professor.
Also, the number of homework assignments may be adjusted upward or
downward during the semester as announced in class by the professor; if such
adjustments are made, the professor will announce in class how the semester
grading will be affected by those changes.
Midterm exam dates are not expected to be revised.
If the professor arranges for one or
more guest speakers to address the class during the semester, the course
schedule may also be revised to accommodate the speakers and their topics. Any such arrangements will be announced in
class by the professor at the time they are made.
SCHEDULE:
Week Date Topics,
1 1/11 Overview of
course. Depository institutions in a
rapidly changing environment. Syllabus; Chapter 1.
1/13 The banking industry and regulation. Chapter 2.
2 1/18 Balance
sheet and income statements of a modern bank.
Chapter 3.
1/20 What's
the objective? Pricing strategies and
constraints.
3 1/25 Tradeoffs;
risk profile and risk management. Chapter 4.
1/27 Review of finance tools: bond pricing;
adjustable rate vs. fixed rate loans. Chapter 6.
4 2/1 Review of
finance tools: duration and convexity. Pages 834-840.
2/3 Measuring and managing interest rate
risk: gap management. Chapter 8.
5 2/8 Measuring
and managing interest rate risk: duration gap.
Chapter 9.
2/10 Financial
fancy footwork: futures and swaps. Chapter 10.
6 2/15 Review Session
2/17 First
Midterm Exam
7 2/22 Review
of exam; overview of next section of course.
2/24 Lending: The bank’s basic business. Chapter
15.
8 3/1 Commercial
lending. Chapter 16.
3/3 Consumer lending; credit cards.
Chapter 17.
9 3/8 Credit
Scoring. Chapter 18.
3/10 Securitization and loan sales.
3/14-3/18 NO CLASS - Spring Break
10 3/22 Regulatory environment (products,
geography, pricing, capital disclosure).
Cost of regulation; cost of change.
Who regulates? Why regulate? Spong, Chapter 1.
3/24 Safety and
soundness regulation: capital; prompt corrective action.
Chapter 13.
Spong, pages 71-82.
11 3/29 Review Session
3/31 Second
Midterm Exam
12 4/5 Review of exam and overview of next
section of course.
4/7 Depositor and consumer
protection: disclosure, FDIC insurance, CRA, fair lending laws. Spong, Chapter 7.
13 4/12 The Federal Reserve’s multiple roles in
the banking industry: monetary policy, service provider, regulator, lender of
last resort.
4/14 The federal safety net.
14 4/19 Survival amid structural change and
globalization. Chapter 21.
4/21 Mergers, antitrust, and cost efficiency. Chapter
22.
15 4/26 Banking as an information and service
business.
4/28 Last Class – review of course
16 5/2-5/6 Finals