Learn implementation of financial models discussed in other courses Including Capital Budgeting, Portfolio optimization, Securities valuation, Value At Risk, ...

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Bang College of Business (BCB) Fall semester, 2013 Course Syllabus for

FIN 4211 Financial Modeling

(1) Basic Information

Course Code and Title: FIN 4211 Financial Modeling.

Course Meeting Time and Place: |Code || Title || || Time || Hall | | | | |Section | | | | |Tuesday, Thursday | |[pic] | |FIN4211 |Financial Modeling |1 |11:30-12:45|#301 N/B | |

Course Credit: Three (3) credits.

Instructor’ Information: Instructor: Gulnara B.Moldasheva, Ph.D Office: Room #344 /Dostyk Building. Phone: # 2704440 ext.2134 E-mail: [email protected]

(2) Instructor Availability Office Hours: 14:00 –16:00 Monday, Wednesday

Additional hours will be available by appointments.

(3) Course Overview

This course will involve using spreadsheets to model financial transactions, perform valuations, and solve complex financial problems from all areas of finance - equity, debt, and their derivatives. By means of spreadsheet functions, Add-ins technology in Excel we will analyze many financial problems and use the models as decision-making aids. Intermediate knowledge of any electronic spreadsheet (Microsoft Excel) required.

(4) Learning Objectives

• Improve Spreadsheet building skills • Learn how to incorporate excel tools such as Solver, Data Tables and etc. • Learn implementation of financial models discussed in other courses Including Capital Budgeting, Portfolio optimization, Securities valuation, Value At Risk, Option Pricing

(5) Relationship of Course and Program

Pre-requisites: FIN 3220- Investments

(6) Teaching Methodology

In a typical session, the professor will lecture on the topics/materials first, followed by questions and/or class discussions. Students are expected to learn the class contents by reading assigned text first and solving, if possible, assigned problems before each lecture. In addition to lecturing, class discussions are strongly encouraged. Special projects and chapter assignments are required. Please note that students may choose to do class and home assignments individually or by a group of 3students who will receive the same (group) score for the same assignment.

(7) Assessment Scheme

A student learning outcomes and final grades will be assessed according to his/her performance in the following areas: (1) You should read assigned chapters and do selected exercises before the class. Most sessions will start with short discussion about the day's topic. The assignments should be done in groups or individually. Lecture and Practice classes will held in computer labs. Class and Home assignments will be delivered on tutorial classes, and cost for 20% points: Each student or a group of 3 students should complete at least 10 chapters assignments (or problems). Each assignment/problem will be for about 1% points, but may vary in according with the number of problems assigned. No late assignments will be accepted. Chapter assignments/problems should be fulfilled in Excel spreadsheets, steps or sequence in solutions must be logically demonstrated, and final answer should be underlined. Each assignment/problem must be handed in at the beginning of a class.

(2) Two mid-term examinations for 15% points. No make-up mid-term tests will be allowed except in extreme circumstances.

(3) Class attendance and active participation for 10% (points): The10% class points will be reduced by 1% if a student misses one entire class, and reduced by 1% for late coming or earlier leaving of a class.

(4) The final examination will be for 40% (points): The final examination will be comprehensive, and will be conducted during the final examination session. Midterms and final exams consist of financial problems that must be solved using Excel models. No make-up exam will be given.

(8) Suggestions for Work:

I strongly recommend your complete the readings before class. Group work on problem sets is allowed and encouraged. However, it is important that each person in a group achieves an understanding of the material. Each person within a group must submit their own homework, and please indicate the names of your colleagues on the assignment with whom you have collaborated.

The sum of the above assessment should equal to 100% or 100 class points, and a student’s total points will determine his/her final class grade, see the following table: |Activities |Class |Percent to |Student hours | | |points |the total |required to | | | |assessment |complete the tasks | |Continuous assessment or | |Assessment during the term (60%) | |Mid-term |2 x 15 |30% |20 | |Examinations | | | | |Class and Home |10 |20% |60 | |Assignments | | | | |and/or problems | | | | |Class attendance |10 |10% |3 | |and participation| | | | |Subtotal |60 |60% |60 hours | |Final Assessment (40%) | |Final Exam |40 |40% |30 hours | |Total |100 |100% |90 hours |

(8) Grading Scale

Letter grades for the course will follow the same standards as specified in the 2007 – 2008 Catalog. See the following table for grading scale:

|Grade quality |Numerical scale | | |Or percentile | | A+ | 90 - 100 | | A| 85 - 89 | |A- | 80 - 84 | |B+ |77 - 79 | | B|73 - 76 | |B- |70 - 72 | |C+ |67 - 69 | | C|63 - 66 | |C- |60 - 62 | | D+ |57 - 59 | |D |53 - 56 | |D- |50 - 52 | | F|Below 50 |

(9) Course Policies and Instructor’s Expectations of Students

The instructor has the following course policies and expectations. First, KIMEP strives for excellence and therefore, the instructor’s expectation of students in this course is very high but is realistic and attainable. It is expected that students should observe the honor codes in this class. Secondly, students are required to attend and to be on time for all classes. Mobile phones and other electronic devices that could disrupt class must be turned off upon entering the classroom. Finally, academic dishonesty is considered a serious offense and is forbidden.

For feedback, problems, or to report dead links please e-mail [email protected]

(10) Tentative Schedule

Sessions Activity Schedule: The following teaching schedule and key dates are presented: |Sessions( by |Class activities, key dates, etc.|Chapter & |Estimated| |weeks) | |assignments |student’s| | | | |time* | |Part 1. Corporate Finance Models | |Sessions 1-4 |Basic financial calculations: |Reading: BMA8e: |12 hours | | |Present value, Future value, NPV |Ch:2-5; | | | |and IRR, Short Cuts, Loan |SB3e: Ch.. 1, | | | |amortization Tables, Excel |Problems 1-14 | | | |Functions: FV, PV, IRR, NPV, PMT | | | |Session 5 |Calculating the cost of capital :|Reading: SB3e: Ch. |6 hours | | |Valuation the Cost of equity |2, Problems 1-10, | | | |Valuation the cost of Debt |Appendixes1,2 | | | |CAPM | | | |Session 6 |Financial Statement Modeling: |Reading: SB3e: |6 hours | | |Building a pro forma model in |Ch.3, Problems 1-10| | | |Excel. | | | | |Doing a discounted cash flow | | | | |(DCF) valuation using a pro forma| | | | |model | | | |Sessions 7-8 |Using Financial Statement Models |Reading: SB3e: Ch. |12 hours | | |for Valuation : |3, Problems 1-6 | | | |Valuing the Firm as an unlevered | | | | |Entity | | | | |The Effect of Leverage on the | | | | |Valuation | | | | |Sensitivity Analysis. | | | | |Mid-term Examination 1*: topics |MT-Exam 1 | | | |to be tested include Chapters 1, |preparation- 4 | | | |2, 3 |hours | | |Session 9 |Building a Financial model: The |Reading: SB3e: Ch. |6 hours | | |Case of KMG Corporation |4, Problems 1-3 | | |Sessions 10-13|Financial Analysis of Leasing The|Reading: SB3e: |12 hours | | |Financial Analysis of Leveraged |Ch.6, Problems 1-4;| | | |Leases. Leasing and Firm |Ch.7, Problems 1-2 | | | |Financing: The Equivalent -Loan | | | | |Method The lessor's Problem: | | | | |Calculating the Highest | | | | |Acceptable Lease Rental | | | | | | |50 hours | |Part2. Portfolio Models | |Sessions 14-16|Portfolio models: introduction |Reading: SB3e: |6 hours | | |Mean, variance, covariance: all |Ch.8, Problems 1-11| | | |with appropriate Excel functions | | | | |and real-world examples. A simple| | | | |Two-Asset example calculating | | | | |portfolio. | | | |Sessions 17-18|Calculating Efficient Portfolios:|Reading: SB3e: |6 hours | | |Portfolio returns and the |Ch .9, Problems | | | |efficient frontier. The capital |1-4, Appendix | | | |market line (CML) and the | | | | |security market line (SML). | | | |Sessions 19-20|Calculating the |Reading: SB3e: |6 hours | | |Variance-Covariance Matrix : The |Ch 10, Problems 1-5| | | |single-Index model Homework 4 | | | | |due. | | | |Sessions 21-22|Estimating Betas and the Security|Reading: SB3e: |6 hours | | |Market Line: CAPM, Calculating |Ch .11, Problems | | | |beta, diversifiable versus |1-2 | | | |idiosyncratic risk, investment |Reading: SB3e: | | | |performance evaluation. Efficient|Ch .12, Problem 1. | | | |Portfolios with Short Sale | | | | |Restrictions: A Numerical | | | | |example. | | | | | | |24 hours | | |Mid-term Examination 2*: topics |MT-Exam 2- | | | |to be tested include Chapters 6, |preparation 4 hours| | | |8,9, 10, 11,12 | | | |Part 3. Option Pricing Models | |Sessions 23-24|Basic Option Definitions and |Reading: SB3e: |6 hours | | |terminology: Option Payoff and |Ch .16, Problems | | | |Profit Patterns Option |1-11 | | | |Strategies: Payoffs from | | | | |portfolios of Options and Stocks | | | | |Binomial model for option pricing| | | |Sessions 25-26|The Binomial model: Basic |Reading: SB3e: Ch |6 hours | | |binomial model. Valuing American|.17, Problems 1-14.| | | |options with early exercise | | | |Sessions 27-28|The Black-Scholes Model : |Reading: SB2e: |4 hours | | |Introduction. The Black- Scholes |Ch .19, Problems | | | |Model Calculating the Implied |1-12. | | | |Volatility. A Macro to Find the | | | | |Implied Variance | | | | | | |16 hours | | |Final examination*. Topics |Preparing for final| | | |include chapters 6,8,9, 10, 11, |examination - 20 | | | |12, 16,17,19 |hours | | |Total hours required by students in studying, |28 hours |90 hours | |preparing, and completing assignments | | |

*For each classroom hour, students are expected to spend two additional hours in out-of-class work or study. (11) Instructional Resources

Required textbook: Financial Modeling, Simon Benninga, The MIT Press , Copyright: 2008, 3nd edition, ISBN 978 0-262 -022628-4 ( in tentative class schedule is noted as SB3e) . Additional Readings:

1. Excel Modeling in the Fundamentals of Corporate Finance, Craig W. Holden, Prentice Hall,Copyright: 2005,ISBN-10: 0131513435 Additional reference materials can be obtained from http://www.prenhall.com/holden 2. Финансовое моделирование в Excel, Дмитрий Жаров, Альпина Бизнес Букс,2008 ISBN-978-5-9614-0885-0 3. Financial modeling in practice. A concise Guide for Intermediate and Advanced Level, Michael Pees, Wiley,2009, ISBN 978-0-470-99744-4 4. Advanced modeling in finance, using Excel and VBA, Mary Jackson, Mike Staunton, Copyright: 2001,ISBN-0-471-49922-6 5. Corporate Finance, Richard A. Brealey,Stewart C. Myers, Franklin Allen; 8th -International edition, McGraw-Hill, IRWIN, 2006, ISBN-13: 978-0-07-111551-3 ( in tentative class schedule is noted as BMA8e) 6. Investments, Zvi Bodie, Alex Kane, Alan J Marcus, McGraw-Hill, IRWIN, 5th edition, 2005 ISBN: 0072861789, Copyright year: 2005

General Rules for Exams: 1. Place your bags and clothes on the designated area – available desk. 2. Come to Exam Room on time. If you come 10 minutes late – 0 point for the exam. 3. Switch off mobile phones, car alarms. 4. Use own calculator, not mobile phone. 5. The exam is closed book, closed-notes. 6. Don’t talk, look at others’ paper (-10%.) 7. Raise your hand if you have a question. 8. You must not to leave classroom until exam ends.

Bang College of Business (BCB) Fall semester, 2013 Course Syllabus for

FIN 4211 Financial Modeling

(1) Basic Information

Course Code and Title: FIN 4211 Financial Modeling.

Course Meeting Time and Place: |Code || Title || || Time || Hall | | | | |Section | | | | |Tuesday, Thursday | |[pic] | |FIN4211 |Financial Modeling |1 |11:30-12:45|#301 N/B | |

Course Credit: Three (3) credits.

Instructor’ Information: Instructor: Gulnara B.Moldasheva, Ph.D Office: Room #344 /Dostyk Building. Phone: # 2704440 ext.2134 E-mail: [email protected]

(2) Instructor Availability Office Hours: 14:00 –16:00 Monday, Wednesday

Additional hours will be available by appointments.

(3) Course Overview

This course will involve using spreadsheets to model financial transactions, perform valuations, and solve complex financial problems from all areas of finance - equity, debt, and their derivatives. By means of spreadsheet functions, Add-ins technology in Excel we will analyze many financial problems and use the models as decision-making aids. Intermediate knowledge of any electronic spreadsheet (Microsoft Excel) required.

(4) Learning Objectives

• Improve Spreadsheet building skills • Learn how to incorporate excel tools such as Solver, Data Tables and etc. • Learn implementation of financial models discussed in other courses Including Capital Budgeting, Portfolio optimization, Securities valuation, Value At Risk, Option Pricing

(5) Relationship of Course and Program

Pre-requisites: FIN 3220- Investments

(6) Teaching Methodology

In a typical session, the professor will lecture on the topics/materials first, followed by questions and/or class discussions. Students are expected to learn the class contents by reading assigned text first and solving, if possible, assigned problems before each lecture. In addition to lecturing, class discussions are strongly encouraged. Special projects and chapter assignments are required. Please note that students may choose to do class and home assignments individually or by a group of 3students who will receive the same (group) score for the same assignment.

(7) Assessment Scheme

A student learning outcomes and final grades will be assessed according to his/her performance in the following areas: (1) You should read assigned chapters and do selected exercises before the class. Most sessions will start with short discussion about the day's topic. The assignments should be done in groups or individually. Lecture and Practice classes will held in computer labs. Class and Home assignments will be delivered on tutorial classes, and cost for 20% points: Each student or a group of 3 students should complete at least 10 chapters assignments (or problems). Each assignment/problem will be for about 1% points, but may vary in according with the number of problems assigned. No late assignments will be accepted. Chapter assignments/problems should be fulfilled in Excel spreadsheets, steps or sequence in solutions must be logically demonstrated, and final answer should be underlined. Each assignment/problem must be handed in at the beginning of a class.

(2) Two mid-term examinations for 15% points. No make-up mid-term tests will be allowed except in extreme circumstances.

(3) Class attendance and active participation for 10% (points): The10% class points will be reduced by 1% if a student misses one entire class, and reduced by 1% for late coming or earlier leaving of a class.

(4) The final examination will be for 40% (points): The final examination will be comprehensive, and will be conducted during the final examination session. Midterms and final exams consist of financial problems that must be solved using Excel models. No make-up exam will be given.

(8) Suggestions for Work:

I strongly recommend your complete the readings before class. Group work on problem sets is allowed and encouraged. However, it is important that each person in a group achieves an understanding of the material. Each person within a group must submit their own homework, and please indicate the names of your colleagues on the assignment with whom you have collaborated.

The sum of the above assessment should equal to 100% or 100 class points, and a student’s total points will determine his/her final class grade, see the following table: |Activities |Class |Percent to |Student hours | | |points |the total |required to | | | |assessment |complete the tasks | |Continuous assessment or | |Assessment during the term (60%) | |Mid-term |2 x 15 |30% |20 | |Examinations | | | | |Class and Home |10 |20% |60 | |Assignments | | | | |and/or problems | | | | |Class attendance |10 |10% |3 | |and participation| | | | |Subtotal |60 |60% |60 hours | |Final Assessment (40%) | |Final Exam |40 |40% |30 hours | |Total |100 |100% |90 hours |

(8) Grading Scale

Letter grades for the course will follow the same standards as specified in the 2007 – 2008 Catalog. See the following table for grading scale:

|Grade quality |Numerical scale | | |Or percentile | | A+ | 90 - 100 | | A| 85 - 89 | |A- | 80 - 84 | |B+ |77 - 79 | | B|73 - 76 | |B- |70 - 72 | |C+ |67 - 69 | | C|63 - 66 | |C- |60 - 62 | | D+ |57 - 59 | |D |53 - 56 | |D- |50 - 52 | | F|Below 50 |

(9) Course Policies and Instructor’s Expectations of Students

The instructor has the following course policies and expectations. First, KIMEP strives for excellence and therefore, the instructor’s expectation of students in this course is very high but is realistic and attainable. It is expected that students should observe the honor codes in this class. Secondly, students are required to attend and to be on time for all classes. Mobile phones and other electronic devices that could disrupt class must be turned off upon entering the classroom. Finally, academic dishonesty is considered a serious offense and is forbidden.

For feedback, problems, or to report dead links please e-mail [email protected]

(10) Tentative Schedule

Sessions Activity Schedule: The following teaching schedule and key dates are presented: |Sessions( by |Class activities, key dates, etc.|Chapter & |Estimated| |weeks) | |assignments |student’s| | | | |time* | |Part 1. Corporate Finance Models | |Sessions 1-4 |Basic financial calculations: |Reading: BMA8e: |12 hours | | |Present value, Future value, NPV |Ch:2-5; | | | |and IRR, Short Cuts, Loan |SB3e: Ch.. 1, | | | |amortization Tables, Excel |Problems 1-14 | | | |Functions: FV, PV, IRR, NPV, PMT | | | |Session 5 |Calculating the cost of capital :|Reading: SB3e: Ch. |6 hours | | |Valuation the Cost of equity |2, Problems 1-10, | | | |Valuation the cost of Debt |Appendixes1,2 | | | |CAPM | | | |Session 6 |Financial Statement Modeling: |Reading: SB3e: |6 hours | | |Building a pro forma model in |Ch.3, Problems 1-10| | | |Excel. | | | | |Doing a discounted cash flow | | | | |(DCF) valuation using a pro forma| | | | |model | | | |Sessions 7-8 |Using Financial Statement Models |Reading: SB3e: Ch. |12 hours | | |for Valuation : |3, Problems 1-6 | | | |Valuing the Firm as an unlevered | | | | |Entity | | | | |The Effect of Leverage on the | | | | |Valuation | | | | |Sensitivity Analysis. | | | | |Mid-term Examination 1*: topics |MT-Exam 1 | | | |to be tested include Chapters 1, |preparation- 4 | | | |2, 3 |hours | | |Session 9 |Building a Financial model: The |Reading: SB3e: Ch. |6 hours | | |Case of KMG Corporation |4, Problems 1-3 | | |Sessions 10-13|Financial Analysis of Leasing The|Reading: SB3e: |12 hours | | |Financial Analysis of Leveraged |Ch.6, Problems 1-4;| | | |Leases. Leasing and Firm |Ch.7, Problems 1-2 | | | |Financing: The Equivalent -Loan | | | | |Method The lessor's Problem: | | | | |Calculating the Highest | | | | |Acceptable Lease Rental | | | | | | |50 hours | |Part2. Portfolio Models | |Sessions 14-16|Portfolio models: introduction |Reading: SB3e: |6 hours | | |Mean, variance, covariance: all |Ch.8, Problems 1-11| | | |with appropriate Excel functions | | | | |and real-world examples. A simple| | | | |Two-Asset example calculating | | | | |portfolio. | | | |Sessions 17-18|Calculating Efficient Portfolios:|Reading: SB3e: |6 hours | | |Portfolio returns and the |Ch .9, Problems | | | |efficient frontier. The capital |1-4, Appendix | | | |market line (CML) and the | | | | |security market line (SML). | | | |Sessions 19-20|Calculating the |Reading: SB3e: |6 hours | | |Variance-Covariance Matrix : The |Ch 10, Problems 1-5| | | |single-Index model Homework 4 | | | | |due. | | | |Sessions 21-22|Estimating Betas and the Security|Reading: SB3e: |6 hours | | |Market Line: CAPM, Calculating |Ch .11, Problems | | | |beta, diversifiable versus |1-2 | | | |idiosyncratic risk, investment |Reading: SB3e: | | | |performance evaluation. Efficient|Ch .12, Problem 1. | | | |Portfolios with Short Sale | | | | |Restrictions: A Numerical | | | | |example. | | | | | | |24 hours | | |Mid-term Examination 2*: topics |MT-Exam 2- | | | |to be tested include Chapters 6, |preparation 4 hours| | | |8,9, 10, 11,12 | | | |Part 3. Option Pricing Models | |Sessions 23-24|Basic Option Definitions and |Reading: SB3e: |6 hours | | |terminology: Option Payoff and |Ch .16, Problems | | | |Profit Patterns Option |1-11 | | | |Strategies: Payoffs from | | | | |portfolios of Options and Stocks | | | | |Binomial model for option pricing| | | |Sessions 25-26|The Binomial model: Basic |Reading: SB3e: Ch |6 hours | | |binomial model. Valuing American|.17, Problems 1-14.| | | |options with early exercise | | | |Sessions 27-28|The Black-Scholes Model : |Reading: SB2e: |4 hours | | |Introduction. The Black- Scholes |Ch .19, Problems | | | |Model Calculating the Implied |1-12. | | | |Volatility. A Macro to Find the | | | | |Implied Variance | | | | | | |16 hours | | |Final examination*. Topics |Preparing for final| | | |include chapters 6,8,9, 10, 11, |examination - 20 | | | |12, 16,17,19 |hours | | |Total hours required by students in studying, |28 hours |90 hours | |preparing, and completing assignments | | |

*For each classroom hour, students are expected to spend two additional hours in out-of-class work or study. (11) Instructional Resources

Required textbook: Financial Modeling, Simon Benninga, The MIT Press , Copyright: 2008, 3nd edition, ISBN 978 0-262 -022628-4 ( in tentative class schedule is noted as SB3e) . Additional Readings:

1. Excel Modeling in the Fundamentals of Corporate Finance, Craig W. Holden, Prentice Hall,Copyright: 2005,ISBN-10: 0131513435 Additional reference materials can be obtained from http://www.prenhall.com/holden 2. Финансовое моделирование в Excel, Дмитрий Жаров, Альпина Бизнес Букс,2008 ISBN-978-5-9614-0885-0 3. Financial modeling in practice. A concise Guide for Intermediate and Advanced Level, Michael Pees, Wiley,2009, ISBN 978-0-470-99744-4 4. Advanced modeling in finance, using Excel and VBA, Mary Jackson, Mike Staunton, Copyright: 2001,ISBN-0-471-49922-6 5. Corporate Finance, Richard A. Brealey,Stewart C. Myers, Franklin Allen; 8th -International edition, McGraw-Hill, IRWIN, 2006, ISBN-13: 978-0-07-111551-3 ( in tentative class schedule is noted as BMA8e) 6. Investments, Zvi Bodie, Alex Kane, Alan J Marcus, McGraw-Hill, IRWIN, 5th edition, 2005 ISBN: 0072861789, Copyright year: 2005

General Rules for Exams: 1. Place your bags and clothes on the designated area – available desk. 2. Come to Exam Room on time. If you come 10 minutes late – 0 point for the exam. 3. Switch off mobile phones, car alarms. 4. Use own calculator, not mobile phone. 5. The exam is closed book, closed-notes. 6. Don’t talk, look at others’ paper (-10%.) 7. Raise your hand if you have a question. 8. You must not to leave classroom until exam ends.