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Hong Kong University of Science and Technology School of Business and Management

FINA 1203 Personal Finance

Spring 2016

Course Syllabus

________________________________________________________________________ Instructor: Professor Lynn Pi Office: Room 5073, LSK Bldg. Phone: 2358 7687 E-mail: lynnpi@ust.hk Office hours: by appointment

TA: Jyoti Sadhwani Office: Room 5068 LSK Phone: 2358 7689 E-mail: josadhwani@ust.hk Office hours: Mondays 3pm - 4pm Thursdays 11am - 12 noon

Course website CANVAS: http://canvas.ust.hk Lectures: L1: Mon & Wed 12:00 – 13:20, CYT G010

L2: Tue & Thur 15:00 – 16:20, CYT G010 Pre-requisite None This is a common core course that is open to all students. Exclusion FINA 2203 Fundamentals of Business Finance, and FINA 2303 Financial Management Students who have taken either of these courses or its equivalence will not be able to earn credits for this course. However, after taking FINA 1203, students can go on to take FINA 2203 or FINA 2303 and earn credits for all these courses. Course Description This course provides a broad perspective on personal finance. It highlights the importance of setting goals, and making good use of financial resources to meet financial obligations in the course of one’s lifetime. Following a comprehensive and step-by-step guide, students will gain skills and knowledge on how to make informed and effective decisions to achieve their financial goals. While various tools and techniques are covered, the emphasis is on the intuition, logic and fundamental principles that underlie their uses. The course provides hands-on practice for students to prepare their financial information and assess their financial health. With basic math skills, students can formulate financial management strategies that deal with their cash, credit and debt choices as well as

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housing decisions. They will gain an understanding of the risk-return tradeoff, and the protection from insurance. Moreover, they will learn how to evaluate investments to accumulate wealth for the long term. Why Study Personal Finance? Managing one’s financial affairs is an essential life skill. All independent individuals are expected to be responsible with their finances. It is therefore important to understand the concept of “financial importance” and develop the right attitude towards money early on. For example, knowing how to budget, how to control your spending, how to pick a good credit card, how to select mortgages, and how to make investments, will greatly benefit you and hopefully free you from financial worries in the future. Course Objectives The objectives of this course are three fold. First, building on students’ basic economics understanding and math knowledge, it aims to extend their knowledge into finance context so they know how to allocate financial resources effectively. Second, it aims to equip students with practical techniques and tools for personal financial management. Third, it aims to develop students’ intuitive quantitative understanding for accepting risk for greater return, in order to develop risk management and investment strategies. In sum, this course aims to empower students with effective analytical skills to solve realistic personal finance problems. Students will be benefited by learning how to make sound financial decisions that can improve their chance of attaining desirable level of wealth and achieving their financial goals. Course Intended Learning Outcomes Upon completion of this course, students are expected to be able to do the following: 1. Assess financial health by preparing and analyzing personal financial

statements 2. Develop cash and credit management strategies 3. Explain the risk and return trade off 4. Evaluate investment choices 5. Plan for retirement 6. Protect financial resources using insurance

Required Learning Materials 1. Textbook

Rober B. Walker, Kristy P. Walker, Personal Finance: Building Your Future, McGraw-Hill/Irwin International ed.

• Purchase ebook on publisher’s website or purchase a hardcopy from the bookstore. • For ebook purchases, read the instructions on CANVAS first. Then go to

publisher’s website: https://create.mheducation.com/shop/ • This book is required of all students since it will be used extensively in the course.

You should also read the assigned chapters in the textbook thoroughly because the

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lectures will only focus on the core and more difficult concepts instead of every detail in the textbook.

Note: This textbook contains information about U.S. financial markets, institutions, regulations and taxation. These will not be covered in examinations. • Copies of the textbook are on reserve in library.

2. Course website: http://canvas.ust.hk You should visit the website regularly because a lot of important information will be available on the course website including Announcements, Syllabus, Modules and Grades. Under Modules • Lecture notes are posted at least one day prior to classes. • Solutions to problems at the end of chapters will be posted after the chapter has

been covered. • Excel worksheets from the textbook are provided. • Supplementary notes and references to websites for local finance information will

be posted. Under Discussion • You may discuss questions with your classmates using “Discussion” • We will not participate in the discussion on CANVAS. • We may post questions from students anonymously and provide the answers on

“Discussion” if we find the questions of common interest to the class.

Note: NO past exam paper will be provided. 3. Recommended online resources

Kahn Academy offers extensive video library, interactive challenges, and assessments on the web. They are free and well presented. We have provided a few links to the key topics covered in this course.

Online video from Kahn Academy: http://www.khanacademy.org/finance-economics/core-finance

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Assessment Class Participation 15% Individual Assignment (2) 12%

Group Assignment (1) 8% Midterm Exam 30% Final Exam 35% 100% i. Class Participation

Because of the large class size of lectures, we will not take attendance in lectures. However, you are strongly recommended to regularly attend the lectures for several main reasons. • First, lecture notes only contain brief outlines and do not include detailed

explanation of the concepts nor step by step solutions to numerical examples. So simply reading the lecture notes may not enable you to fully understand the concepts. Skipping classes will definitely hurt your performance because the assignments and exam questions are heavily based on materials covered in class.

• Second, class participation is important for your learning experience and highly encouraged. It helps you think actively rather than passively, keeps you involved and motivated rather than removed and disinterested. In-class exercises and in-class discussion in which participation by group is required. They are not graded but you will receive credit for class participation. And the answers will only be provided in class. This is also to achieve the learning objective of this course: developing effective team work and working with students from multicultural background. There will also be short exercises given in class.

• Third, you can earn bonus points by asking or answering questions in class! You will only receive full class participation credit by completing 90% of the in-class exercises AND gaining at least 4 bonus points.

• Please bring some A4 size or letter size blank papers to each class for the in-class activities. When you submit these exercises, you will have to put down your group number and contributing members’ names clearly on the upper part of the paper. No credit will be given if the group or student information is illegible.

ii. Forming of Groups • At the beginning of the semester, you will be randomly formed into groups of 6

students to participate in group activities. The list of group members will be confirmed after the drop-add period. You will stay with the same members throughout the semester and you are not allowed to change groups. As such, you are expected to cope with and manage group dynamics.

• To make class management in a large session easier, we will assign a group number and a specific spot in the classroom to your group. All groups are

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required to sit according to the seating plan after groups are formed. The seating plan will be rotated twice during the semester.

iii. Individual Assignments

• More details of the assignment topic and requirements will be provided in class. • Late assignments will not be accepted under any circumstance.

iv. Group Assignment

• All members of the group are expected to contribute equally to the assignment. Each group will submit one copy of the written assignment. On the front page, you should clearly put down the group number, student names and student ID numbers of all contributing members. Only those students whose names appear on the cover page will receive points for the assignment.

• For group assignments, all members in the group will receive the same score. However, at the end of the semester you will have a chance to rate the contribution of your group members toward the group assignment by completing a confidential peer evaluation. Outstanding members will be able to earn more points, while inactive members will receive fewer points.

• Note: If you fail to evaluate members in your group, as a penalty to you, you will receive 50% of the original group score only.

v. Examinations • There will be two examinations, a midterm and a final. Both exams are 2 hours

long. • The format for examinations will be multiple choices. Questions are designed

to test your understanding of core personal finance concepts and principles. • The final examination will not be cumulative, but keep in mind that some

materials presented in the first part of the course is relevant to the second part of the course.

• The examinations are closed book. Calculators are allowed but programmable calculators and calculators with text display functions are NOT allowed.

• We will provide a practice quiz before the midterm exam, so you could be more familiar with the format and nature of the exam questions.

Note: Midterm exam will be announced in the first week of class. There are no alternative examination arrangements. Please make sure that you do not have time conflict with the midterm exam. Only in the case if you miss the examinations due to extenuating circumstances beyond your control, then there will be special makeup exams. If you miss the midterm exam with an approved reason, you will be required to take a makeup exam. The weight of the midterm exam will never be added to the final exam. If you miss the final exam, the arrangement will follow university guidelines. A student who misses an examination without a valid excuse will receive “zero” mark for that examination.

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Class Conduct This is a large class. You should behave professionally and refrain from disturbing your classmates and the professor. To foster the best learning environment and help develop your professional skills, you should abide by the following professional codes of conduct:

• Punctuality You are expected to arrive and be seated prior to the start of each class session –

no late arrivals! If you need to come in late for various reasons, please do so quietly.

• Preparation You are expected to complete the readings and any take home exercises prior to

each class session. When in class, be prepared to participate actively in group discussion and other learning activities.

• Consideration

o Always turn off your cell phones before entering the classroom. Using phones while class is in session is not permitted.

o Use of laptop, PDA, and other electronic device during class should be strictly for activities related to the class session ONLY. Accessing emails is not permitted.

o You are expected to remain in the classroom for the duration of the class session unless an urgent need arises or prior arrangements have been made with me.

o NO chatting with other students or creating disturbance in the lectures. Discussion with classmates should only be during group activities.

o NO eating or drinking in the classroom. Communication You are welcome to discuss your questions regarding the lectures or course materials with me or the TA. I am generally available immediately after class. Or you can make an appointment to see me. While you may also email us the questions, some questions might not be properly answered in a few sentences and so we may not reply. Generally it will be better if you ask the question in class, or visit the TA during the office hours. Moreover, to get the most effective results, the questions should be something which remains unclear after you have done all relevant readings, actively discussed with your classmates, and well thought through. Academic Integrity Academic integrity and honesty are critical values in upholding HKUST's reputation as a community of scholars and its claim to the "intellectual property" created by staff and students. As a student of HKUST, you are committed to the Academic Honor Code.

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It is dishonest and a violation of student academic integrity if you:

1. Plagiarize You commit plagiarism by taking someone else’s ideas, words, or other types of product and presenting them as your own. You can avoid plagiarism by using proper methods of documentation and acknowledgement.

2. Copy or collaborate on the individual assignments You may use lecture notes, textbook, and other references when working on the in-class exercises or group assignments. However, it is dishonest to collaborate with others or copy other people’s work when completing the individual assignments.

3. Falsify attendance record You must NOT put down names of other students to misrepresent his or her participation in activities or exercises in class.

4. Cheat on an exam You must NOT receive or provide any unauthorized assistance on an exam.

5. Engage in other forms of deceit or dishonesty that violates the spirit of the Academic Honor Code.

If you have any questions regarding the definition of allowable behavior, or if something seems ambiguous, it is your responsibility to ask for clarification prior to engaging in the activity. Violation of the Code will result in serious penalty and you may face further disciplinary action from the business school and/or the university. How to succeed in FINA 1203

Spend at least 6 hours per week studying outside classroom • Read assigned textbook chapter/ notes prior to each class • Complete pre-lecture activities and take home exercises on time • Attend lectures and take notes • Actively participate in class discussion and activities • Practice questions and problems in textbook

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Course Outline Part I Planning and Budgeting 1 Personal finance basics 2 Time value of money 3 Budgeting and planning Part II Credit Management 4 Consumer credit 5 Home loans Part III Investing 6 Risk and return trade-off 7 Investment fundamentals 8 Investing in ETFs and Mutual Funds 9 Retirement planning and MPF 10 Investing in stocks 11 Investing in bonds Part IV Tax and Protection 12 Tax management 13 Life insurance