FIJI NATIONAL UNIVERSITY

COLLEGE OF BUSINESS, HOSPITALITY AND TOURISM STUDIES

SCHOOL OF ECONOMICS, BANKING AND FINANCE
DEPARTMENT OF BANKING & FINANCE

FIN 701 Investment and Portfolio Analysis

16 Credit Points

Unit Coordinator & Lecturer:

Email:
Phone:

Contributing Lecturers:

LECTURES
DAY EVENING
Tuesday 12 -2 pm [ERC 1] Thursday 6pm -8pm[ERC 9]

TUTORIALS
Wednesday 11 1pm [ERC 5] Thursday 8pm -9pm [ERC 9]
Thursday 11-1pm [ERC 5]

Consultation Time: Tuesday 10am 11am

Prerequisite: The student must have passed FIN 601 or receive a

consent from HOD.

E-Information: All pertinent information relating to the unit will be

posted on moodle (web learning platform).
Students are required to check this platform
regularly for communication from the lecturer.

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 1

1.0 Welcome
I welcome you to this Unit and hope that you will find it enriching and
interesting. This unit will introduce you to the theory and applications of
investment finance. This unit is a core unit for B. Com major in Finance.

2.0 Unit Description

This unit will allow students to obtain a broad knowledge of the asset
allocation process, security markets, market structures, the risk-return
characteristics of investment products, and hedging applications with
financial innovations through the unit materials, lectures, discussions, and
assignments. The emphasis of this unit is on both intellectual stimulation and
practical rigorous applications, through the security analysis project. The unit
emphasis is on the development of both quantitative analytic skills and
presentation skills

It provides a comprehensive coverage of basic concepts, theories,

applications and decision-making rules in financial investments. In particular,
the unit will focus on the analysis of stocks, bonds, options and other
derivative securities. Additionally, the unit will examine the role and
performance of portfolio managers, mutual funds and other investment
companies.

This unit provides students with crucial concepts of investment decision-

making, portfolio theory and valuation model of financial assets. Capital Asset
Pricing Model (CAPM) and Arbitrage Pricing Theory (APT) are emphasized.

3.0 Learning Outcomes

On successful completion of this unit, students will be able to:

1. Apply the basic principles and concepts related to investment and

portfolio analysis;
2. comprehend various valuation techniques of investments;
3. Undertake the management of portfolios and its measurements;
4. Value bond portfolio management and measurement.
5. Evaluate the various dimensions of a securities market.
6. Analyze the types of mutual funds and its performance;
7. Evaluate the Capital Asset Pricing Model and the Arbitrage Pricing
Theory;
8. Analyze the various dimensions of equity valuation;
9. Analyze the various dimensions of options market.

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 2

 Weeks Lectures Assessment
Dates
1 Introduction To Investments And
16 Jan 20th Jan
th
Portfolio Analysis
Investment Setting, Asset Classes And
2
Financial Instrument
23 Jan 27th Jan
rd

3 Security Trading/ Security Analysis

30 Jan 3rd Feb
th

4 Mutual Funds
6 Feb - 10th Feb
th

5 Efficient Diversification Single Factor

13 Feb - 17th Feb
th
Model
6 Mid Trimester
20 Feb 24th Feb
th
Exam (20%)
7
27 Feb 3rd Mar
th
Mid Trimester Break
Capital Asset Pricing And Arbitrage
8
Pricing Theory
6 Mar 10th Mar
th

Bond Characteristics And Managing Assignment Due

9
Bond Portfolio (15%)
13 Mar 17th Mar
th

10 Equity Valuation And Equity Portfolio Presentation

20 Mar 24th Mar
th
Management (5%)
11 Options Market And Valuation
27 Mar 31st Mar
th

12 Evaluation Of Portfolio Performance

3 Apr 7th Apr
rd

13 Sum Up/ Study Week

10 Apr 14th Apr
th

14 Study Week /Exam Week

17 Apr 21st Apr
th

15 Exam Week
24 Apr 28th Apr
th

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 3

4.0 Unit Content and Reading References

TOPIC 1: INTRODUCTION TO INVESTMENTS AND PORTFOLIO

ANALYSIS

Learning Outcome
This topic is designed to be a standard introductory topic. As such, its
purpose is to introduce students to the subject of Investments, explain what
this topic is concerned with from a summary viewpoint, and outline what the
remainder of the unit will cover. It defines important terms such as
investments, security analysis, portfolio management, expected and realized
rate of return, risk-free rate of return, and risk.

Performance Criteria
After studying this topic, the students should be able to:
1.1Introduce students to the subject matter of Investments from an
overall viewpoint, including terminology
1.2The nature of investment.
1.3The importance of studying investments.
1.4Understand the investment decision making process.
1.5Explain the basic nature of the investing decision as a trade-of
between expected return and risk.
1.6Explain that the decision process consists of security analysis and
portfolio management and those external factors afect this decision
process. These factors include uncertainty, the necessity to think of
investments in a global context, the environment involving
institutional investors, and the impact of the Internet on investing.
1.7Understand the term investment and factors used to diferentiate
types of investments.
1.8 Discuss the principal types of investment vehicles.
1.9Describe the steps in investing and managing personal tax issues.
1.10 Discuss investing over the life cycle and in diferent economic
environments.

Reading Resource Materials

1. Lecture Notes
2. Text: chapter 1; Understanding Investments

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 4

TOPIC 2: INVESTMENT SETTING, ASSET CLASSES AND FINANCIAL
INSTRUMENT

Learning Outcome
The purpose of topic 2 is to provide an overview of the major types of
financial assets available to investors; these are discussed in later topics. It
also develops the important alternatives of direct and indirect investing. This
topic seeks to provide basic information about financial assets at the outset
so that students are prepared to handle basic discussions of investing during
the unit.

Performance Criteria
After studying this topic, the students should be able to:
2.1Provide an overview of the major financial assets available to investors
and discussed in subsequent chapters
2.2Explain in some detail the financial assets of importance to most
investors, bonds, and stocks
2.3Explain investors alternatives, which consist of direct investing,
indirect investing, or, as is often done, a combination of the two.
2.4Organize financial assets
2.5Analyze investing directly and indirectly in money market, capital
market and other types of securities
2.6Critically analyze why this is important in today's investing
environment
2.7Evaluate nonmarketable financial assets
2.8Evaluate money market securities
2.9Evaluate fixed-interest securities
2.10 Evaluate equity securities
2.11 Evaluate derivative securities

Reading Resource Materials

1. Lecture Notes
2. Text: chapter 2; Investment Alternatives

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 5

TOPIC 3: SECURITY TRADING

Learning Outcome
Topic 3 is designed to cover the markets where financial assets trade, with
particular emphasis on equity markets. It provides an analysis of the
structure of secondary markets, with securities organized by where they are
traded. Terminology is explained, and the functioning of the markets,
primarily the SPSE are considered in some detail. Considerable attention to
the major aspects of brokerage transactions is placed in this topic.

Performance Criteria
After studying this topic, the students should be able to:
3.1Explain primary and secondary markets in terms of their components
and organizational structure
3.2Explain terminology (e.g. broker, specialist, etc) pertaining to markets
and participants
3.3Evaluate the structure and functioning of the secondary markets, with
emphasis on the SPSE.
3.4Analyze the changes that have occurred in the secondary markets and
that may occur in the next few years.
3.5Provide students with a good understanding of what brokers do, how
securities are traded.
3.6Explain the mechanics of securities trading, such as brokerage
transactions, margin trading, and short selling.
3.7Provide an overview of how markets are regulated without simply
describing the various federal acts.

Reading Resource Materials

1. Lecture Notes
2. Text: chapter 5; .How securities are traded

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 6

TOPIC 5: MUTUAL FUNDS

Learning Outcome
Topic 5, covering indirect investing, is a logical sequence to Topic 2, which
focused on direct purchases and sales of assets by investors. Topic 3 begins
by showing how households have increasingly turned to indirect investing
through pension funds and mutual funds. The details of indirect investing are
considered next. What is involved when buying a mutual fund or closed-end
fund in terms of how to do it, the expenses involved, and so forth.

Performance Criteria
After studying this topic, the students should be able to:
5.1Emphasize the important alternative for all investors of indirect
investing, and how it fits in most investors overall plans when
investing
5.2Explain the various types of investment companies, including methods
of operation, objectives, expenses, and so forth.
5.3Discuss important issues such as fund performance and how to use
funds to invest internationally.
5.4Discuss important new developments in this area, primarily exchange-
traded funds.
5.5Distinguish between listed and unlisted trusts, and investment
companies.
5.6Evaluate the attractions and weaknesses of mutual funds.
5.7Evaluate Open and Closed end investmement companies.
Calculate :
5.8Net Asset value (NAV).
5.9Premium and Discount calculation.
5.10 Rate of Return.
5.11 Holding Period Return.

Reading Resource Materials

1. Lecture Notes
2. Text: chapter 3; Managed Funds

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 7

TOPIC 6: EFFICIENT DIVERSIFICATION SINGLE FACTOR MODEL

Learning Outcome
Topic 6 provides discussion on analyzing the efficient frontier, the Single
Index Model simplification of the efficient frontier, how the efficient frontier is
changed by borrowing and lending, and the Separation Theorem. This
organisational structure allows students to concentrate on related ideas
together, and does not overwhelm them all at once with the complete details
of this important material.

Performance Criteria
After studying this topic, the students should be able to:
6.1Supplement the brief analysis of portfolio theory in earlier topics by
showing the details of Markowitz portfolio theory, and the Single Index
Model
6.2Outline and describe the steps involved in building a portfolio, starting
with the efficient set and then allowing for borrowing and lending
possibilities
6.3Present the Separation Theorem

Reading Resource Materials

1. Lecture Notes
2. Text: chapter 6; Understanding and managing risk and return

TOPIC 7: CAPITAL ASSET PRICING AND ARBITRAGE PRICING THEORY

Learning Outcome
Topic 7 follows topic because capital market theory builds on portfolio theory
by examining how asset prices are determined in a world of Markowitz
diversifiers.
The topic outlines the necessary assumptions to derive capital market theory
and introduces the concept of equilibrium in the capital markets. Important
related concepts are introduced and discussed, primarily the market portfolio.

Performance Criteria
After studying this topic, the students should be able to:
7.1Develop the concept of asset pricing theory as a natural extension of
portfolio theory
7.2Develop the concepts of the CML and SML, explain what they mean,
and consider how they can be used

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 8

 7.3Consider related issues such as what beta measures and the problems
with estimating beta, systematic and nonsystematic risk, problems in
testing asset pricing models, and so forth
7.4Provide the necessary information about APT, including what it means
and how it could be used to make investment decisions

Reading Resource Materials

1. Lecture Notes
2. Text: chapter 19; Capital market theory

1. Text: chapter 21; Evaluation to investment performance

5.0 Resources
The recommended texts are:

Jones, P, C; Shamsudin, A; Naumann, K (2007), Investments- Analysis and

Management, 2nd edition, John Wiley & Sons, Australia.

Students must also read the listed readings after every topic.

Supplementary
Gitman and Joehnk (2008), Fundamentals of Investing, 10th edition, Pearson
Education, Inc, USA.

Gordon J. Alexander, William F. Sharpe, and Jefery V.

Bailey(2007),Fundamentals of Investments, 3rd Edition, Pearson Education,
Inc, USA.

Zvi Bodie, Alex Kane and Alan Marcus, (2009) Investments 8th edition,
Irwin/McGraw Hill, 2008.

6.0 Assessment
6.1 Grades
(a) The overall mark for the unit depends on performance during the
trimester (40%) and performance in the final examination (60%).
In Class Assessment
)b Research/Assignment/Presentations 20%
(Write up 15% & Presentation 5%)
)c Mid -Trimester test 20%
Final Examination 60%

(b) In order to pass the unit, that is, to obtain a grade of C- or better, it is necessary to score at
least 40% (ie 20/50) in the final examination. It is highly recommended that students
attend all tutorials/labs/workshops

6.2Letter Grade Scale The following grading scales would be used:

1. Grade Marks GPA

FIN701: Investment and Portfolio Analysis Trimester 1 2017 Page 9

A+ 90-100 4.33- High
5.00 Distinction
A 85-89 4.00- Distinction
4.27
A- 80-84 3.73- Distinction
3.93
B+ 75-79 3.33- High Credit
3.60
B 70-74 3.00- Credit
3.27
B- 65-69 2.67- Credit
2.93
C+ 60-64 2.33- Pass
2.60
C 55-59 2.00- Pass
2.27
C- 50-54 1.67- Pass
1.93
D+ 45-49 1.33- Fail
1.60
D 40-44 1.00- Fail
1.27
D- 35-39 0.67- Fail
0.93
E Below 35 0-0.60 Fail
DNQ Did Not Qualify; student received over 0 Fail
50% of total marks but did not meet
other specified conditions for a pass
W Withdrawn from Unit 0
CT Credit Transfer 0 Cross credit
(CT)
NV Null & Void for Dishonest practice 0
I Result withheld/Incomplete assessment 0
X Continuing course 0
DNC Did Not Complete 0
CP Compassionate Pass 0
Aeg Aegrotat Pass 0
PT Pass Terminating 0
P Pass 0
NP Not Passed 0

7.0 Programme Regulations and Dissatisfaction with Assessment

The academic conducts of the students are governed by the University

Academic and Students Regulation (UASR). All students must obtain a copy of
the UASR from the FNU academic office and familiarize themselves with all
academic matters.

FIN701: Investment and Portfolio Analysis Trimester 1 2017Page 10

Should a student be dissatisfied with either the internal or external
assessment, they can take the following steps to get redress of their
grievance.

Internal Assessment: The student can refer the work back to the unit
coordinator for checking and reassessment. Following this reassessment, if
the student is still dissatisfied, the student may refer the work to the HOD.
The HOD will then appoint another lecturer to examine the work and result
will then stand.
Final Exam: The student can apply for re-check of the grade as per the
procedures laid down in the UASR.

8.0 Plagiarism and Dishonest Practice Regulation

Plagiarism and dishonest practices are serious ofences for which ofenders
shall be penalized. Students must read the relevant section of UASR to
understand the various types of cases defined as dishonest practices in
academic work and to also know the penalties associated with these kinds of
practices.

FIN701: Investment and Portfolio Analysis Trimester 1 2017Page 11