**Sample Course Road Map**

**Sample Course Road Map**

LECTURE NO. | TOPIC | LEVEL |

1* | The Time Vale of Money | Medium |

(Week 1-2) | ||

a. Interpret interest rates as | ||

required rate of return | ||

discount rate, or opportunity | ||

cost. | ||

b. Explain interest rates as the | ||

sum of a real risk-free rate, | ||

expected inflation, and | ||

premiums that compensate | ||

investors for distinct types of | ||

risk. |

2 | The Time Vale of Money | High | |

(Week 1-2) | |||

c. | Calculate and interpret the | ||

effective annual rate, give the | |||

stated annual interest rate and | |||

the frequency of | |||

compounding. (May involve | |||

numeric questions) | |||

d. | Solve time value of money | ||

problems when compounding | |||

periods are other than annual. | |||

(May involve numeric | |||

questions) | |||

3 | The Time Vale of Money | Medium | |

(Week 1-2) | |||

e. | Calculate and interpret the | ||

future value (FV) and present | |||

value (PV) of a single sum of | |||

money an ordinary annuity an | |||

annuity due perpetuity (PV | |||

only) and a series of unequal | |||

cash flows. (May involve | |||

numeric questions) | |||

4 | The Time Vale of Money | High | |

(Week 1-2) | |||

f. | Draw a time line and solve | ||

time value of money | |||

applications (for example | |||

mortgages and savings for | |||

college tuition or retirement). | |||

(May involve numeric | |||

questions) | |||

5 | Discounted Cash Flow | Medium |

Applications | |||

(Week 3-4) | |||

a. | Calculate and interpret the net | ||

present value (NPV) and the | |||

internal rate of return (IRR) of | |||

an investment. (May involve | |||

numeric questions) | |||

b. | Contrast the NPV rule to the | ||

IRR rule, and identify | |||

problems associated with the | |||

IRR rule. | |||

c. | Define, calculate and interpret | ||

holding period return (total | |||

return). (May involve | |||

numeric questions) | |||

6 | Discounted Cash Flow | High | |

Applications | |||

(Week 3-4) | |||

d. | Calculate interpret, and | ||

distinguish between the | |||

money weighted and time | |||

weighted rates of return of a | |||

portfolio and appraise the | |||

performance of portfolios | |||

based on these measures. | |||

(May involve numeric | |||

questions) | |||

e. | Calculate and interpret the | ||

bank discount yield, holding | |||

period yield effective annual | |||

yield and money market | |||

yields, for a US treasury bill. | |||

(May involve numeric | |||

questions) | |||

f. | Convert among holding period | ||

yield money market yields, | |||

effective annual yields, and | |||

bond equivalent yields. (May | |||

involve numeric questions) | |||

7 | Discounted Cash Flow | Medium | |

Applications | |||

(Week 3-4) | |||

g. | (cont.) Calculate and interpret | ||

the bank discount yield, | |||

holding period yield effective | |||

annual yield and money | |||

market yields, for a US | |||

treasury bill. (May involve | |||

numeric questions) | |||

h. | Convert among holding period | ||

yield money market yields, | |||

effective annual yields, and | |||

bond equivalent yields. (May | |||

involve numeric questions) | |||

8 | Statistical Concepts and | Medium | |

Market Returns | |||

(Week 4-5) | |||

a. | Differentiate between | ||

descriptive statistics and | |||

inferential statistics, between | |||

a population and a sample, | |||

and among the types of | |||

measurement scales. | |||

b. | Define a parameter a sample | ||

statistic, and a frequency | |||

distribution. | |||

c. | Calculate and interpret | ||

relative frequencies and | |||

cumulative relative | |||

frequencies given a frequency | |||

distribution (May involve | |||

numeric questions) | |||

d. | Describe the properties of | ||

data set presented as a | |||

histogram or a frequency | |||

polygon. | |||

e. | Define calculate and interpret | ||

measures of central tendency, | |||

including the population mean | |||

sample mean sample mean | |||

arithmetic mean, weighted | |||

average or mean (including a | |||

portfolio return viewed as a | |||

weighted mean), geometric | |||

means harmonic means media | |||

and mode. (May involve | |||

numeric questions) | |||

f. | Describe calculate and | ||

interpret quartiles quintiles | |||

deciles and percentiles. (May | |||

involve numeric questions) | |||

9 | Statistical Concepts and | Medium | |

Market Returns | |||

(Week 4-5) | |||

g. | Define calculate and interpret | ||

1) a range and a mean | |||

absolute deviation and 2) the | |||

variance and standard | |||

deviation of a population and | |||

of a sample (May involve | |||

numeric questions) | |||

h. | Calculate and interpret the | ||

proportion of observations | |||

falling within a specified | |||

number of standard deviations | |||

of the mean using Chebyshev’s | |||

inequality. (May involve | |||

numeric questions) | |||

i. | Define calculate and interpret | ||

the coefficient of variation and | |||

the Sharpe ratio. (May | |||

involve numeric questions) | |||

10 | Statistical Concepts and | High | |

Market Returns | |||

(Week 4-5) | |||

j. | Define and interpret skewness | ||

explain the meaning of a | |||

positively or negatively | |||

skewed return distribution and | |||

describe the relative locations | |||

of the mean median and mode | |||

for a nonsymmetrical | |||

distribution. | |||

k. | Define and interpret measure | ||

of sample skewness and | |||

kurtosis. | |||

l. | Discuss the use of arithmetic | ||

mean or geometric mean | |||

when determining investment | |||

returns. | |||

11 | Probability Concepts | Medium | |

(Week 5-7) | |||

a. | Define a random variable an | ||

outcome an event mutually | |||

exclusive and exhaustive | |||

events. | |||

b. | Explain the two defining | ||

properties of probability and | |||

distinguish among empirical | |||

subjective and priori | |||

probabilities. | |||

c. | State the probability of an | ||

event in terms of odds for or |

against the event. | |||

d. | Distinguish between | ||

unconditional and conditional | |||

probabilities. | |||

12 | Probability Concepts | Medium | |

(Week 5-7) | |||

e. | Define and explain the | ||

multiplication addition and | |||

total probability rules. | |||

f. | Calculate and interpret 1) the | ||

joint probability of two events, | |||

2) the probability that at least | |||

one of two event will occur | |||

given the probability of each | |||

and the joint probability of the | |||

two events, and 3) a joint | |||

probability of any number of | |||

independent events. (May | |||

involve numeric questions) | |||

g. | Distinguish between | ||

dependent and independent | |||

events. | |||

h. | Calculate and interpret, using | ||

the total probability rule, an | |||

unconditional probability. | |||

(May involve numeric | |||

questions) | |||

13 | Probability Concepts | High | |

(Week 5-7) | |||

i. | Explain the use of conditional | ||

expectation in investment | |||

applications. | |||

j. | Diagram an investment | ||

problem using a tree diagram. | |||

k. | Calculate and interpret | ||

covariance and correlation. | |||

(May involve numeric | |||

questions) | |||

l. | Calculate and interpret the | ||

expected value, variance and | |||

standard deviation of a | |||

random variable and of | |||

returns on a portfolio. (May | |||

involve numeric questions) | |||

14 | Probability Concepts | High |

(Week 5-7) | |||

m. Calculate and interpret | |||

covariance given a joint | |||

probability function. (May | |||

involve numeric questions) | |||

n. | Calculate and interpret an | ||

updated probability using | |||

Bayes’ formula. (May | |||

involve numeric questions) | |||

o. | Identify the most | ||

appropriate method to | |||

solve a particular counting | |||

problem, and solve | |||

counting problems using | |||

factorial, combination, and | |||

permutation concepts. | |||

(May involve numeric | |||

questions) | |||

15 | Common Probability | High | |

Distributions | |||

(Week 8-9) | |||

a. | Define a binomial random | ||

variable. | |||

b. | Calculate and interpret | ||

probabilities given the | |||

binomial distribution | |||

functions. (May involve | |||

numeric questions) | |||

16 | Common Probability | High | |

Distributions | |||

(Week 8-9) | |||

c. | Construct a binomial tree to | ||

describe stock price | |||

movement. (May involve | |||

numeric questions) | |||

d. | Define calculate and interpret | ||

tracking error. (May involve | |||

numeric questions) | |||

Computer Applications and | |||

Course Revision (Week 10-11) | |||

17 | Portfolio Management: An | Medium | |

Overview | |||

From 11 Dec, 2017. | |||

(Week 12) | |||

a. | Explain the importance of the | ||

portfolio perspective. |

b. | Discuss the types of | ||

investment management | |||

clients and the distinctive | |||

characteristics and needs of | |||

each. | |||

c. | Describe the steps in the | ||

portfolio management | |||

process. | |||

18 | Portfolio Management: An | Medium | |

Overview | |||

(Week 12) | |||

d. | Describe compare, and | ||

contrast mutual funds and | |||

other forms of pooled | |||

investments. | |||

19 | Portfolio Risk and Return: Part | High | |

I | |||

(Week 12-13) | |||

a. | Calculate and interpret major | ||

return measures and describe | |||

their applicability. (May | |||

involve numeric questions) | |||

b. | Describe the characteristics of | ||

the major asset classes that | |||

investors would consider | |||

informing portfolios according | |||

to mean-variance portfolio | |||

theory | |||

c. | Calculate and interpret the | ||

mean, variance and covariance | |||

(or correlation) of asset | |||

returns based on historical | |||

data. (May involve numeric | |||

questions) | |||

d. | Explain risk aversion and its | ||

implication for portfolio | |||

standard deviation | |||

20 | Portfolio Risk and Return: Part | High | |

I | |||

(Week 12-13) | |||

e. | Calculate and interpret | ||

portfolio standard deviation. | |||

(May involve numeric | |||

questions) | |||

f. | Describe the effect on a | ||

portfolio risk of investing in | |||

assets that are less than |

perfectly correlated. | |||

g. | Describe and interpret the | ||

minimum variance and | |||

efficient frontiers of risky | |||

assets and the global | |||

minimum variance portfolio. | |||

h. | Discuss the selection of an | ||

optimal portfolio given an | |||

investor’s utility (or risk | |||

aversion) and the capital | |||

allocation line. | |||

Computer Applications | |||

(Risk and Return Calculations | |||

regarding portfolios on excel | |||

using real time data) | |||

21 | Portfolio Risk and Return: Part | High | |

II | |||

(Week 13-14) | |||

a. | Discuss the implication of | ||

combining risk free asset with | |||

a portfolio of risky assets. | |||

b. | Explain and interpret the | ||

capital allocation line (CAL) | |||

and the capital market line | |||

(CML). | |||

c. | Explain systematic and | ||

non-systematic risk and why an | |||

investor should not expect to | |||

receive additional return for | |||

bearing non-systematic risk. | |||

22 | Portfolio Risk and Return: Part | High | |

II | |||

(Week 13-14) | |||

d. | Explain return generating | ||

models (including the market | |||

model) and their uses. | |||

e. | Calculate and interpret beta. | ||

(May involve numeric | |||

questions) | |||

f. | Explain the capital asset | ||

pricing model (CAPM) | |||

including the required | |||

assumptions, and the security | |||

market line (SML) | |||

23 | Portfolio Risk and Return: Part | High |

II | |||

(Week 14-15) | |||

g. | Calculate and interpret the | ||

expected return of an asset | |||

using the CAPM (May | |||

involve numeric questions) | |||

h. | Illustrate applications of the | ||

CAPM and the SML. | |||

24 | Multifactor Models and APT | Medium | |

(Week 15-16) | |||

a. | Describe and compare | ||

macroeconomic factor | |||

models, fundamental factor | |||

models, and statistical factor | |||

models. | |||

b. | Calculate the expected return | ||

on a portfolio of two stocks, | |||

given the estimated | |||

macroeconomic factor model | |||

for each stock. (May involve | |||

numeric questions) | |||

25 | Multifactor Models and APT | Medium | |

(Week 15-16) | |||

c. | Describe arbitrage pricing | ||

theory (APT), including its | |||

underlying assumptions and | |||

its relation to multifactor | |||

models, define arbitrage | |||

opportunity and determine | |||

whether an arbitrage | |||

opportunity exists and | |||

calculate the expected return | |||

on an asset given an asset’s | |||

factor sensitivities and the | |||

factor risk premiums. | |||

26 | Derivative Markets and | Medium | |

Instruments | |||

(Week 17) | |||

a. | Define a derivative and | ||

differentiate between | |||

exchange-traded and over-the- | |||

counter derivatives. | |||

b. | Define a forward commitment | ||

and a contingent claim. | |||

c. | Differentiate among the basic | ||

characteristics of forward

contracts, futures contracts,

options (calls and puts), and

swaps.

- Discuss the purposes and criticisms of derivative markets.
- Explain arbitrage and the role it plays in determining prices and promoting market efficiency.

27 | Forward Market Contracts | High | |

(Week 17) | |||

a. | Explain delivery/ settlement | ||

and default risk for both long | |||

and short positions in a | |||

forward contract. | |||

b. | Describe the procedures for | ||

settling a forward contract at | |||

expiration, and discuss how | |||

termination alternatives prior | |||

to expiration can affect credit | |||

risk. | |||

c. | Differentiate between a dealer | ||

and an end user of a forward | |||

contract. | |||

d. | Describe the characteristics of | ||

equity forward contracts and | |||

forwards contracts on zero- | |||

coupon and coupon bonds. |

28 | Forward Market Contracts | High | |

(Week 18) | |||

e. | Describe the characteristics of | ||

the Eurodollar time deposit | |||

market, and define LIBOR and | |||

Euribor. | |||

f. | Describe the characteristics | ||

and calculate the gain/loss of | |||

forward rate agreements | |||

(FRAs) (May involve | |||

numeric questions) | |||

g. | Calculate and interpret the | ||

payoff of an FRA, and explain | |||

each of the component terms | |||

(May involve numeric | |||

questions) | |||

h. | Describe the characteristics of |

currency forwards contracts.

29 | Futures Markets Contracts | Medium | |

(Week 18) | |||

a. | Describe the characteristics | ||

of futures contracts. | |||

b. | Distinguish between futures | ||

contracts and forward | |||

contracts. | |||

c. | Differentiate between | ||

margins the securities | |||

markets and margin in the | |||

futures markets, and explain | |||

the role of initial margin, | |||

maintenance margin, | |||

variation margin, and | |||

settlement on future trading. | |||

d. | Describe price limits and the | ||

process of marketing to | |||

marker, and calculate and | |||

interpret the margin balance, | |||

given the previous day’s | |||

balance and the change in | |||

the future price (May | |||

involve numeric | |||

questions) | |||

e. | Describe how a future | ||

contracts can be terminated | |||

at or prior to expiration. | |||

f. | Describe the characteristics | ||

of the following types of | |||

futures contracts: Treasury | |||

bill, Eurodollar, Treasury | |||

bond, stock index, and | |||

currency. | |||

30 | Option Markets and Contracts: | Medium | |

(Week 19-20) | |||

a. Describe call and put options. | |||

b. | Distinguish between European | ||

and American options. | |||

c. | Define the concept of money- | ||

ness of an option. | |||

d. | Differentiate between | ||

exchange –traded options and | |||

over-the –counter options. | |||

e. Identify the types of options in | |||

terms of the underlying | |||

instruments. | |||

f. | Compare and contrast interest | ||

rate options with forward rate

agreements.

31 | Option Markets and Contracts: | High | |

(Week 19-20) | |||

g. | Define interest rate caps | ||

floors, and dollars. | |||

h. | Calculate and interpret option | ||

payoffs, and explain how | |||

interest rate options differ | |||

from other types of options | |||

(May involve numeric | |||

questions) | |||

i. | Define intrinsic value and time | ||

value, and explain their | |||

relationship. | |||

j. | Determine the minimum and | ||

maximum values of European | |||

options and American options. | |||

k. | Calculate and interpret for | ||

minimum values and lower | |||

bounds. (May involve | |||

numeric questions) | |||

32 | Option Markets and Contracts: | High | |

(Week 19-20) | |||

l. | Explain and calculate how the | ||

value of an option is | |||

determined using a one- | |||

period binomial model. (May | |||

involve numeric questions) | |||

m. Explain how option prices are | |||

affected by the exercise price | |||

and the time to expiration. | |||

n. | Explain put-call parity for | ||

European options and relate | |||

put-call parity to arbitrage and | |||

the construction of synthetic | |||

options. | |||

o. | Contrast American options | ||

with European options in | |||

terms of the lower bounds on | |||

option prices and the | |||

possibility of early exercise. | |||

p. | Explain how cash flows on the | ||

underlying asset affect put-call | |||

parity and the lower bounds | |||

of option prices. | |||

q. | Indicate the directional effect | ||

of an interest rate change or |

volatility change on an

option’s price.

33 | Swap Markets and Contracts: | High |

(Week 20-21) | ||

a. Describe the characteristics of | ||

swap contracts and explain | ||

how swaps are terminated. | ||

b. Define, calculate, and | ||

interpret the payments of | ||

currency swaps, plain vanilla | ||

interest rate swaps, and equity | ||

swaps. (May involve | ||

numeric questions) | ||

Course Revision and | ||

Presentations/Projects | ||

(Week 21) |

- *Lecture 1 includes the course introduction, exam format and marking scheme. and marking scheme.
- Financial calculator is a MUST
- Expected Hours: 48 (including computer applications) or 45 (without computer applications)

**ASSIGNMENT/PRESENTATION/SEMINAR**

- 1 session on Asset Pricing Models (Mid of November 17 or J anuary 18) [5 marks]
- Project based on Portfolios Risk and Return. (Deadline: 15th J anuary, 2018) [10 marks].
- Group presentation on the performance of Futures Market. (Deadline: First week of Feb, 2018) [5 marks].

**COMPUTER APPLICATIONS**

- Calculation of NPV and IRR on MS Excel.
- Descriptive Statistics on SPSS (Return distribution using real time data).
- Tree diagram using MS Excel.
- Risk/Return calculation regarding portfolios using MS Excel.
- One period binomial model for option pricing