Class Notes for Corporate Finance, 2nd Edition
Class Notes for Corporate Finance, 2nd Edition summarizes important topics for quick revision.
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Instructor’s Resource Guide for
Dr. Michael Casey
University of Central Arkansas
Dr. Michael Casey
University of Central Arkansas
ii
Introduction
This Instructors’ Resource Manual is meant to be a tool for instructors, to make their teaching
less stressful and more effective. The tools and activities contained here are comprehensive in
type and scope, and we hope you find them useful as you progress through Corporate Finance
Online during your semester.
This Instructors’ Manual has several tools, each geared toward mastery of the learning
objectives in their respective sections:
Pre-Test These Pre-Tests come at the beginning of every chapter; they are 10 questions
long, all multiple choice, focusing on terms and background for the topic covered in that
chapter. They will help instructors to ascertain students’ incoming level of knowledge, so
teaching may be focused on areas where students need more instruction.
Overview Short paragraphs at the beginning of each chapter review learning objectives
and main concepts and explain the context of the topics covered in the finance world.
Teaching Tools There are many tools in CFO: videos, Excel templates, Explain it! and
Solution Tools. The Teaching Tools section identifies each tool in the chapter, with a brief
explanation of its content and purpose.
Assessment Tools CFO also contains many built-in assessments. Assessment Tools
identifies the Self-Tests, Practice, Homework, and Quiz assignments by section, so
instructors may use and evaluate them as needed.
Class Application Activities These applied classroom activities help instructors vary and
guide class time. They include Q&A, teaching notes, and a quick summary of the major
concept discussed.
Post-Test The Post-Test at the end of each chapter reviews the main concepts and
equations from each chapter. It is similar in structure to the Pre-Test, being multiple-
choice, but the questions are more detailed and aimed at assessing student mastery.
You will find the tools listed in this order in each chapter of the Instructors’ Manual; hyperlinks
in the Table of Contents make them easy to reach.
Introduction
This Instructors’ Resource Manual is meant to be a tool for instructors, to make their teaching
less stressful and more effective. The tools and activities contained here are comprehensive in
type and scope, and we hope you find them useful as you progress through Corporate Finance
Online during your semester.
This Instructors’ Manual has several tools, each geared toward mastery of the learning
objectives in their respective sections:
Pre-Test These Pre-Tests come at the beginning of every chapter; they are 10 questions
long, all multiple choice, focusing on terms and background for the topic covered in that
chapter. They will help instructors to ascertain students’ incoming level of knowledge, so
teaching may be focused on areas where students need more instruction.
Overview Short paragraphs at the beginning of each chapter review learning objectives
and main concepts and explain the context of the topics covered in the finance world.
Teaching Tools There are many tools in CFO: videos, Excel templates, Explain it! and
Solution Tools. The Teaching Tools section identifies each tool in the chapter, with a brief
explanation of its content and purpose.
Assessment Tools CFO also contains many built-in assessments. Assessment Tools
identifies the Self-Tests, Practice, Homework, and Quiz assignments by section, so
instructors may use and evaluate them as needed.
Class Application Activities These applied classroom activities help instructors vary and
guide class time. They include Q&A, teaching notes, and a quick summary of the major
concept discussed.
Post-Test The Post-Test at the end of each chapter reviews the main concepts and
equations from each chapter. It is similar in structure to the Pre-Test, being multiple-
choice, but the questions are more detailed and aimed at assessing student mastery.
You will find the tools listed in this order in each chapter of the Instructors’ Manual; hyperlinks
in the Table of Contents make them easy to reach.
iii
CONTENTS
CHAPTER 1: INTRODUCTION TO FINANCE .................................................................................................... 1
I. PRE-TEST ................................................................................................................................................ 1
II. Chapter 1: OVERVIEW ........................................................................................................................... 2
III. TEACHING TOOLS ................................................................................................................................. 3
IV. ASSESSMENT TOOLS ............................................................................................................................ 4
V. CLASS APPLICATION ACTIVITIES ............................................................................................................ 5
CLASS APPLICATION ACTIVITIES 1.1 ...................................................................................................... 5
CLASS APPLICATION ACTIVITIES 1.2 ...................................................................................................... 6
CLASS APPLICATION ACTIVITIES 1.3 ...................................................................................................... 6
CLASS APPLICATION ACTIVITIES 1.4 ...................................................................................................... 7
VI. POST-TEST ............................................................................................................................................ 8
CHAPTER 2: FINANCIAL STATEMENT AND RATIO ANALYSIS ....................................................................... 10
I. PRE-TEST .............................................................................................................................................. 10
II. CHAPTER 2: OVERVIEW ....................................................................................................................... 11
III. TEACHING TOOLS ............................................................................................................................... 12
IV. ASSESSMENT TOOLS .......................................................................................................................... 14
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 15
CLASS APPLICATION ACTIVITIES 2.1 .................................................................................................... 15
CLASS APPLICATION ACTIVITIES 2.2 .................................................................................................... 16
CLASS APPLICATION ACTIVITIES 2.3 .................................................................................................... 17
CLASS APPLICATION ACTIVITIES 2.4 .................................................................................................... 18
VI. POST-TEST .......................................................................................................................................... 18
CHAPTER 3: INTRODUCTION TO TIME VALUE OF MONEY .......................................................................... 22
I. PRE-TEST .............................................................................................................................................. 22
II. CHAPTER 3: OVERVIEW ....................................................................................................................... 23
III. TEACHING TOOLS ............................................................................................................................... 24
CONTENTS
CHAPTER 1: INTRODUCTION TO FINANCE .................................................................................................... 1
I. PRE-TEST ................................................................................................................................................ 1
II. Chapter 1: OVERVIEW ........................................................................................................................... 2
III. TEACHING TOOLS ................................................................................................................................. 3
IV. ASSESSMENT TOOLS ............................................................................................................................ 4
V. CLASS APPLICATION ACTIVITIES ............................................................................................................ 5
CLASS APPLICATION ACTIVITIES 1.1 ...................................................................................................... 5
CLASS APPLICATION ACTIVITIES 1.2 ...................................................................................................... 6
CLASS APPLICATION ACTIVITIES 1.3 ...................................................................................................... 6
CLASS APPLICATION ACTIVITIES 1.4 ...................................................................................................... 7
VI. POST-TEST ............................................................................................................................................ 8
CHAPTER 2: FINANCIAL STATEMENT AND RATIO ANALYSIS ....................................................................... 10
I. PRE-TEST .............................................................................................................................................. 10
II. CHAPTER 2: OVERVIEW ....................................................................................................................... 11
III. TEACHING TOOLS ............................................................................................................................... 12
IV. ASSESSMENT TOOLS .......................................................................................................................... 14
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 15
CLASS APPLICATION ACTIVITIES 2.1 .................................................................................................... 15
CLASS APPLICATION ACTIVITIES 2.2 .................................................................................................... 16
CLASS APPLICATION ACTIVITIES 2.3 .................................................................................................... 17
CLASS APPLICATION ACTIVITIES 2.4 .................................................................................................... 18
VI. POST-TEST .......................................................................................................................................... 18
CHAPTER 3: INTRODUCTION TO TIME VALUE OF MONEY .......................................................................... 22
I. PRE-TEST .............................................................................................................................................. 22
II. CHAPTER 3: OVERVIEW ....................................................................................................................... 23
III. TEACHING TOOLS ............................................................................................................................... 24
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IV. ASSESSMENT TOOLS .......................................................................................................................... 26
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 27
CLASS APPLICATION ACTIVITIES 3.1 .................................................................................................... 27
CLASS APPLICATION ACTIVITIES 3.2 .................................................................................................... 28
CLASS APPLICATION ACTIVITIES 3.3 .................................................................................................... 29
CLASS APPLICATION ACTIVITIES 3.4 .................................................................................................... 29
VI. POST-TEST .......................................................................................................................................... 30
CHAPTER 4: ANNUITIES AND LOANS ........................................................................................................... 33
I. PRE-TEST .............................................................................................................................................. 33
II. CHAPTER 4: OVERVIEW ....................................................................................................................... 34
III. TEACHING TOOLS ............................................................................................................................... 35
IV. ASSESSMENT TOOLS .......................................................................................................................... 38
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 39
CLASS APPLICATION ACTIVITIES 4.1 .................................................................................................... 39
CLASS APPLICATION ACTIVITIES 4.2 .................................................................................................... 40
CLASS APPLICATION ACTIVITIES 4.3 .................................................................................................... 40
CLASS APPLICATION ACTIVITIES 4.4 .................................................................................................... 41
VI. POST-TEST .......................................................................................................................................... 42
CHAPTER 5: INTRODUCTION TO RISK AND RETURN ................................................................................... 45
I. PRE-TEST .............................................................................................................................................. 45
II. CHAPTER 5: OVERVIEW ....................................................................................................................... 46
III. TEACHING TOOLS ............................................................................................................................... 47
IV. ASSESSMENT TOOLS .......................................................................................................................... 48
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 49
CLASS APPLICATION ACTIVITIES 5.1 .................................................................................................... 49
CLASS APPLICATION ACTIVITIES 5.2 .................................................................................................... 50
CLASS APPLICATION ACTIVITIES 5.3 .................................................................................................... 50
IV. ASSESSMENT TOOLS .......................................................................................................................... 26
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 27
CLASS APPLICATION ACTIVITIES 3.1 .................................................................................................... 27
CLASS APPLICATION ACTIVITIES 3.2 .................................................................................................... 28
CLASS APPLICATION ACTIVITIES 3.3 .................................................................................................... 29
CLASS APPLICATION ACTIVITIES 3.4 .................................................................................................... 29
VI. POST-TEST .......................................................................................................................................... 30
CHAPTER 4: ANNUITIES AND LOANS ........................................................................................................... 33
I. PRE-TEST .............................................................................................................................................. 33
II. CHAPTER 4: OVERVIEW ....................................................................................................................... 34
III. TEACHING TOOLS ............................................................................................................................... 35
IV. ASSESSMENT TOOLS .......................................................................................................................... 38
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 39
CLASS APPLICATION ACTIVITIES 4.1 .................................................................................................... 39
CLASS APPLICATION ACTIVITIES 4.2 .................................................................................................... 40
CLASS APPLICATION ACTIVITIES 4.3 .................................................................................................... 40
CLASS APPLICATION ACTIVITIES 4.4 .................................................................................................... 41
VI. POST-TEST .......................................................................................................................................... 42
CHAPTER 5: INTRODUCTION TO RISK AND RETURN ................................................................................... 45
I. PRE-TEST .............................................................................................................................................. 45
II. CHAPTER 5: OVERVIEW ....................................................................................................................... 46
III. TEACHING TOOLS ............................................................................................................................... 47
IV. ASSESSMENT TOOLS .......................................................................................................................... 48
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 49
CLASS APPLICATION ACTIVITIES 5.1 .................................................................................................... 49
CLASS APPLICATION ACTIVITIES 5.2 .................................................................................................... 50
CLASS APPLICATION ACTIVITIES 5.3 .................................................................................................... 50
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CLASS APPLICATION ACTIVITIES 5.4 .................................................................................................... 51
CLASS APPLICATION ACTIVITIES 5.5 .................................................................................................... 52
VI. POST-TEST .......................................................................................................................................... 53
CHAPTER 6: PORTFOLIO THEORY ................................................................................................................ 56
I. PRE-TEST .............................................................................................................................................. 56
II. CHAPTER 6: OVERVIEW ....................................................................................................................... 57
III. TEACHING TOOLS ............................................................................................................................... 58
IV. ASSESSMENT TOOLS .......................................................................................................................... 60
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 62
CLASS APPLICATION ACTIVITIES 6.1 .................................................................................................... 62
CLASS APPLICATION ACTIVITIES 6.2 .................................................................................................... 62
CLASS APPLICATION ACTIVITIES 6.3 .................................................................................................... 63
CLASS APPLICATION ACTIVITIES 6.4 .................................................................................................... 64
VI. POST-TEST .......................................................................................................................................... 65
CHAPTER 7: INTEREST RATES AND BONDS ................................................................................................. 68
CLASS APPLICATION ACTIVITIES 5.4 .................................................................................................... 51
CLASS APPLICATION ACTIVITIES 5.5 .................................................................................................... 52
VI. POST-TEST .......................................................................................................................................... 53
CHAPTER 6: PORTFOLIO THEORY ................................................................................................................ 56
I. PRE-TEST .............................................................................................................................................. 56
II. CHAPTER 6: OVERVIEW ....................................................................................................................... 57
III. TEACHING TOOLS ............................................................................................................................... 58
IV. ASSESSMENT TOOLS .......................................................................................................................... 60
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 62
CLASS APPLICATION ACTIVITIES 6.1 .................................................................................................... 62
CLASS APPLICATION ACTIVITIES 6.2 .................................................................................................... 62
CLASS APPLICATION ACTIVITIES 6.3 .................................................................................................... 63
CLASS APPLICATION ACTIVITIES 6.4 .................................................................................................... 64
VI. POST-TEST .......................................................................................................................................... 65
CHAPTER 7: INTEREST RATES AND BONDS ................................................................................................. 68
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I. PRE-TEST .............................................................................................................................................. 81
II. CHAPTER 8: OVERVIEW ....................................................................................................................... 82
III. TEACHING TOOLS ............................................................................................................................... 83
IV. ASSESSMENT TOOLS .......................................................................................................................... 86
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 87
CLASS APPLICATION ACTIVITIES 8.1 .................................................................................................... 87
CLASS APPLICATION ACTIVITIES 8.2 .................................................................................................... 87
CLASS APPLICATION ACTIVITIES 8.3 .................................................................................................... 88
CLASS APPLICATION ACTIVITIES 8.4 .................................................................................................... 89
VI. POST-TEST .......................................................................................................................................... 90
CHAPTER 9: CAPITAL BUDGETING: INTRODUCTION AND TECHNIQUES ..................................................... 92
I. PRE-TEST .............................................................................................................................................. 92
II. CHAPTER 9: OVERVIEW ....................................................................................................................... 93
III. TEACHING TOOLS ............................................................................................................................... 94
IV. ASSESSMENT TOOLS .......................................................................................................................... 96
I. PRE-TEST .............................................................................................................................................. 81
II. CHAPTER 8: OVERVIEW ....................................................................................................................... 82
III. TEACHING TOOLS ............................................................................................................................... 83
IV. ASSESSMENT TOOLS .......................................................................................................................... 86
V. CLASS APPLICATION ACTIVITIES .......................................................................................................... 87
CLASS APPLICATION ACTIVITIES 8.1 .................................................................................................... 87
CLASS APPLICATION ACTIVITIES 8.2 .................................................................................................... 87
CLASS APPLICATION ACTIVITIES 8.3 .................................................................................................... 88
CLASS APPLICATION ACTIVITIES 8.4 .................................................................................................... 89
VI. POST-TEST .......................................................................................................................................... 90
CHAPTER 9: CAPITAL BUDGETING: INTRODUCTION AND TECHNIQUES ..................................................... 92
I. PRE-TEST .............................................................................................................................................. 92
II. CHAPTER 9: OVERVIEW ....................................................................................................................... 93
III. TEACHING TOOLS ............................................................................................................................... 94
IV. ASSESSMENT TOOLS .......................................................................................................................... 96
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CLASS APPLICATION ACTIVITIES 10.1 ................................................................................................ 108
CLASS APPLICATION ACTIVITIES 10.2 ................................................................................................ 109
CLASS APPLICATION ACTIVITIES 10.3 ................................................................................................ 110
CLASS APPLICATION ACTIVITIES 10.4 ................................................................................................ 110
VI. POST-TEST ........................................................................................................................................ 111
CHAPTER 11: COST OF CAPITAL ................................................................................................................ 114
I. PRE-TEST ............................................................................................................................................ 114
II. CHAPTER 11: OVERVIEW ................................................................................................................... 115
III. TEACHING TOOLS ............................................................................................................................. 116
IV. ASSESSMENT TOOLS ........................................................................................................................ 117
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 118
CLASS APPLICATION ACTIVITIES 11.1 ................................................................................................ 118
CLASS APPLICATION ACTIVITIES 11.2 ................................................................................................ 119
CLASS APPLICATION ACTIVITIES 11.3 ................................................................................................ 120
CLASS APPLICATION ACTIVITIES 11.4 ................................................................................................ 121
CLASS APPLICATION ACTIVITIES 10.1 ................................................................................................ 108
CLASS APPLICATION ACTIVITIES 10.2 ................................................................................................ 109
CLASS APPLICATION ACTIVITIES 10.3 ................................................................................................ 110
CLASS APPLICATION ACTIVITIES 10.4 ................................................................................................ 110
VI. POST-TEST ........................................................................................................................................ 111
CHAPTER 11: COST OF CAPITAL ................................................................................................................ 114
I. PRE-TEST ............................................................................................................................................ 114
II. CHAPTER 11: OVERVIEW ................................................................................................................... 115
III. TEACHING TOOLS ............................................................................................................................. 116
IV. ASSESSMENT TOOLS ........................................................................................................................ 117
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 118
CLASS APPLICATION ACTIVITIES 11.1 ................................................................................................ 118
CLASS APPLICATION ACTIVITIES 11.2 ................................................................................................ 119
CLASS APPLICATION ACTIVITIES 11.3 ................................................................................................ 120
CLASS APPLICATION ACTIVITIES 11.4 ................................................................................................ 121
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CHAPTER 13: DIVIDENDS, REPURCHASES, AND SPLITS ............................................................................. 134
I. PRE-TEST ............................................................................................................................................ 134
II. CHAPTER 13: OVERVIEW ................................................................................................................... 136
III. TEACHING TOOLS ............................................................................................................................. 136
IV. ASSESSMENT TOOLS ........................................................................................................................ 138
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 139
CLASS APPLICATION ACTIVITIES 13.1 ................................................................................................ 139
CLASS APPLICATION ACTIVITIES 13.2 ................................................................................................ 139
CLASS APPLICATION ACTIVITIES 13.3 ................................................................................................ 140
CLASS APPLICATION ACTIVITIES 13.4 ................................................................................................ 141
VI. POST-TEST ........................................................................................................................................ 141
CHAPTER 14: FINANCIAL PLANNING AND FORECASTING ......................................................................... 144
I. PRE-TEST ............................................................................................................................................ 144
II. CHAPTER 14: OVERVIEW ................................................................................................................... 145
III. TEACHING TOOLS ............................................................................................................................. 145
CHAPTER 13: DIVIDENDS, REPURCHASES, AND SPLITS ............................................................................. 134
I. PRE-TEST ............................................................................................................................................ 134
II. CHAPTER 13: OVERVIEW ................................................................................................................... 136
III. TEACHING TOOLS ............................................................................................................................. 136
IV. ASSESSMENT TOOLS ........................................................................................................................ 138
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 139
CLASS APPLICATION ACTIVITIES 13.1 ................................................................................................ 139
CLASS APPLICATION ACTIVITIES 13.2 ................................................................................................ 139
CLASS APPLICATION ACTIVITIES 13.3 ................................................................................................ 140
CLASS APPLICATION ACTIVITIES 13.4 ................................................................................................ 141
VI. POST-TEST ........................................................................................................................................ 141
CHAPTER 14: FINANCIAL PLANNING AND FORECASTING ......................................................................... 144
I. PRE-TEST ............................................................................................................................................ 144
II. CHAPTER 14: OVERVIEW ................................................................................................................... 145
III. TEACHING TOOLS ............................................................................................................................. 145
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V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 156
CLASS APPLICATION ACTIVITIES 15.1 ................................................................................................ 156
CLASS APPLICATION ACTIVITIES 15.2 ................................................................................................ 157
CLASS APPLICATION ACTIVITIES 15.3 ................................................................................................ 158
CLASS APPLICATION ACTIVITIES 15.4 ................................................................................................ 159
CLASS APPLICATION ACTIVITIES 15.5 ................................................................................................ 160
VI. POST-TEST ........................................................................................................................................ 160
CHAPTER 16: INTERNATIONAL FINANCE ................................................................................................... 163
I. PRE-TEST ............................................................................................................................................ 163
II. CHAPTER 16: OVERVIEW ................................................................................................................... 164
III. TEACHING TOOLS ............................................................................................................................. 165
IV. ASSESSMENT TOOLS ........................................................................................................................ 165
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 166
CLASS APPLICATION ACTIVITIES 16.1 ................................................................................................ 166
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 156
CLASS APPLICATION ACTIVITIES 15.1 ................................................................................................ 156
CLASS APPLICATION ACTIVITIES 15.2 ................................................................................................ 157
CLASS APPLICATION ACTIVITIES 15.3 ................................................................................................ 158
CLASS APPLICATION ACTIVITIES 15.4 ................................................................................................ 159
CLASS APPLICATION ACTIVITIES 15.5 ................................................................................................ 160
VI. POST-TEST ........................................................................................................................................ 160
CHAPTER 16: INTERNATIONAL FINANCE ................................................................................................... 163
I. PRE-TEST ............................................................................................................................................ 163
II. CHAPTER 16: OVERVIEW ................................................................................................................... 164
III. TEACHING TOOLS ............................................................................................................................. 165
IV. ASSESSMENT TOOLS ........................................................................................................................ 165
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 166
CLASS APPLICATION ACTIVITIES 16.1 ................................................................................................ 166
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CLASS APPLICATION ACTIVITIES 17.4 ................................................................................................ 178
VI. POST-TEST ........................................................................................................................................ 179
CHAPTER 18: FUTURES AND OPTIONS ...................................................................................................... 181
I. PRE-TEST ............................................................................................................................................ 181
II. CHAPTER 18: OVERVIEW ................................................................................................................... 182
III. TEACHING TOOLS ............................................................................................................................. 183
IV. ASSESSMENT TOOLS ........................................................................................................................ 184
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 185
CLASS APPLICATION ACTIVITIES 18.1 ................................................................................................ 185
CLASS APPLICATION ACTIVITIES 18.2 ................................................................................................ 186
CLASS APPLICATION ACTIVITIES 18.3 ................................................................................................ 186
CLASS APPLICATION ACTIVITIES 18.4 ................................................................................................ 187
VI. POST-TEST ........................................................................................................................................ 188
CLASS APPLICATION ACTIVITIES 17.4 ................................................................................................ 178
VI. POST-TEST ........................................................................................................................................ 179
CHAPTER 18: FUTURES AND OPTIONS ...................................................................................................... 181
I. PRE-TEST ............................................................................................................................................ 181
II. CHAPTER 18: OVERVIEW ................................................................................................................... 182
III. TEACHING TOOLS ............................................................................................................................. 183
IV. ASSESSMENT TOOLS ........................................................................................................................ 184
V. CLASS APPLICATION ACTIVITIES ........................................................................................................ 185
CLASS APPLICATION ACTIVITIES 18.1 ................................................................................................ 185
CLASS APPLICATION ACTIVITIES 18.2 ................................................................................................ 186
CLASS APPLICATION ACTIVITIES 18.3 ................................................................................................ 186
CLASS APPLICATION ACTIVITIES 18.4 ................................................................................................ 187
VI. POST-TEST ........................................................................................................................................ 188
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V. CLASS APPLICATION ACTIVITIES
These activities, complete with solutions, provide opportunities to reinforce (either in class or in
small groups) students’ ability to apply chapter concepts in business contexts.
CLASS APPLICATION ACTIVITIES 1.1
Title: Occupational Outlook Handbook and Finance Careers
LO2 – Understand the Four Facets of Finance: the role of the financial manager, careers in
finance, personal finance, and academic finance
Numerous career options are available to finance graduates. Students can begin careers in
government, the non-profit sector, corporate finance, banking, investments and wealth
management, education and other fields. However, it is useful to know the expected salaries
and the projected job demand for a particular skill set prior to spending years acquiring the
expertise to work in that field. One of the ways you can learn more about a particular career is
to research that career in the Occupational Outlook Handbook published by the Bureau of Labor
Statistics. Go to the following website:
http://www.bls.gov/ooh/
Now look under the heading “Occupation Groups” and click on the link “Business and Financial.”
Scroll down through the list of job titles and select one that interests you and read all the
information posted about that job.
Questions to pose:
1. What is the education required for an entry-level position? Does the job require any
licensure requirements?
Answer: It varies according to the job selected.
2. What is the expected starting salary for this position?
Answer: It varies according to the job selected.
3. What is the projected job growth in this field for the next several years?
V. CLASS APPLICATION ACTIVITIES
These activities, complete with solutions, provide opportunities to reinforce (either in class or in
small groups) students’ ability to apply chapter concepts in business contexts.
CLASS APPLICATION ACTIVITIES 1.1
Title: Occupational Outlook Handbook and Finance Careers
LO2 – Understand the Four Facets of Finance: the role of the financial manager, careers in
finance, personal finance, and academic finance
Numerous career options are available to finance graduates. Students can begin careers in
government, the non-profit sector, corporate finance, banking, investments and wealth
management, education and other fields. However, it is useful to know the expected salaries
and the projected job demand for a particular skill set prior to spending years acquiring the
expertise to work in that field. One of the ways you can learn more about a particular career is
to research that career in the Occupational Outlook Handbook published by the Bureau of Labor
Statistics. Go to the following website:
http://www.bls.gov/ooh/
Now look under the heading “Occupation Groups” and click on the link “Business and Financial.”
Scroll down through the list of job titles and select one that interests you and read all the
information posted about that job.
Questions to pose:
1. What is the education required for an entry-level position? Does the job require any
licensure requirements?
Answer: It varies according to the job selected.
2. What is the expected starting salary for this position?
Answer: It varies according to the job selected.
3. What is the projected job growth in this field for the next several years?
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CLASS APPLICATION ACTIVITIES 1.2
Title: Nasdaq IPOs
LO5 – Learn the Difference between Primary and Secondary Markets
An initial public offering (IPO) occurs when corporations sell equity capital to the public for the
first time and become listed and publicly traded on an organized stock exchange. Sizes of the
IPOs typically fall into the $50 million to $500 million range and are relatively unknown
companies. Nasdaq tracks IPOs and maintains an extensive database on IPOs in the pipeline and
recent IPOs. Go to the following website and then answer a few questions.
http://www.nasdaq.com/markets/ipos/
Questions to pose:
1. Look at the “Latest IPOs” and click on the link “View All Latest IPOs.” How many IPOs came
out during that period? What was the size (offer amount) of the largest IPO? What was the
size (offer amount) of the smallest? What was the smallest offer price? What was the largest
offer price?
Answer: Varies.
2. Scroll down the page to the “IPO Performance” graph that shows the best and worst
performers over the past six months. What company generated the best returns for
investors? What company generated the worst returns for investor? Provide some
background information on each firm and information on the returns generated.
Answer: Varies.
Time on task: This exercise can take between 15 and 30 minutes, depending on how long it
takes to find and summarize the findings.
Teaching Notes: This activity allows students to learn about the IPO market at the time they are
taking the class. You can ask dozens of questions about the material on this site and IPOs in
general.
Table of Contents
CLASS APPLICATION ACTIVITIES 1.2
Title: Nasdaq IPOs
LO5 – Learn the Difference between Primary and Secondary Markets
An initial public offering (IPO) occurs when corporations sell equity capital to the public for the
first time and become listed and publicly traded on an organized stock exchange. Sizes of the
IPOs typically fall into the $50 million to $500 million range and are relatively unknown
companies. Nasdaq tracks IPOs and maintains an extensive database on IPOs in the pipeline and
recent IPOs. Go to the following website and then answer a few questions.
http://www.nasdaq.com/markets/ipos/
Questions to pose:
1. Look at the “Latest IPOs” and click on the link “View All Latest IPOs.” How many IPOs came
out during that period? What was the size (offer amount) of the largest IPO? What was the
size (offer amount) of the smallest? What was the smallest offer price? What was the largest
offer price?
Answer: Varies.
2. Scroll down the page to the “IPO Performance” graph that shows the best and worst
performers over the past six months. What company generated the best returns for
investors? What company generated the worst returns for investor? Provide some
background information on each firm and information on the returns generated.
Answer: Varies.
Time on task: This exercise can take between 15 and 30 minutes, depending on how long it
takes to find and summarize the findings.
Teaching Notes: This activity allows students to learn about the IPO market at the time they are
taking the class. You can ask dozens of questions about the material on this site and IPOs in
general.
Table of Contents
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Questions to pose:
1. What is a Ponzi scheme?
Answer: A Ponzi scheme promises investors high returns and then delivers those returns by
paying existing investors with money flowing in from new investors. Ponzi schemes require a
continuous inflow of new money to keep going.
2. Look up some of the other famous financial con artists such as Bernie Madoff, Dona Branca
and others. What do most of these schemes have in common?
Answer: They all promise high returns and prey on human greed. A good rule of thumb is
illustrated in the old saying, “If it sounds too good to be true, it probably is.”
Time on task: This exercise can take between 15 and 30 minutes depending on how long it takes
to find and summarize the findings. You can extend this to a full class period or more if you have
students do presentations on various con artists and their fraud.
Teaching Notes: This activity is a great example to use to teach students about risk and return
and financial ethics. There are always people willing to separate you from your money. This is a
great classroom debate and you can assign students various individuals to report on so that
everyone reports on a different con artist.
CLASS APPLICATION ACTIVITIES 1.4
Title: Refund anticipation loans and the time value of money
LO7 – Learn Six Important Ideas in Finance
Refund anticipation loans (RALs) are available from a number of tax preparers and touted as a
way to access your tax refund sooner. The tax preparer loans you an amount equal to your
anticipated refund, minus interest charges and fees, and then has your refund directed to their
account. In the following article, it states that in 2009 approximately 7 million taxpayers took
advantage of RALs and paid more than $650 million in interest and fees to receive their refund a
few weeks early. Read the following article and then answer a few questions.
http://www.aarp.org/money/taxes/info-03-2011/ask-sid-tax-refund-loans.html
Questions to pose:
1. How do RALs relate to the time value of money?
Answer: Individuals are obviously willing to accept a smaller sum today in lieu of a larger sum
at some point in the future. This example illustrates the concept of the time value of money,
or a dollar today is worth more than a dollar in the future.
2. What makes this practice unethical according to some critics?
Questions to pose:
1. What is a Ponzi scheme?
Answer: A Ponzi scheme promises investors high returns and then delivers those returns by
paying existing investors with money flowing in from new investors. Ponzi schemes require a
continuous inflow of new money to keep going.
2. Look up some of the other famous financial con artists such as Bernie Madoff, Dona Branca
and others. What do most of these schemes have in common?
Answer: They all promise high returns and prey on human greed. A good rule of thumb is
illustrated in the old saying, “If it sounds too good to be true, it probably is.”
Time on task: This exercise can take between 15 and 30 minutes depending on how long it takes
to find and summarize the findings. You can extend this to a full class period or more if you have
students do presentations on various con artists and their fraud.
Teaching Notes: This activity is a great example to use to teach students about risk and return
and financial ethics. There are always people willing to separate you from your money. This is a
great classroom debate and you can assign students various individuals to report on so that
everyone reports on a different con artist.
CLASS APPLICATION ACTIVITIES 1.4
Title: Refund anticipation loans and the time value of money
LO7 – Learn Six Important Ideas in Finance
Refund anticipation loans (RALs) are available from a number of tax preparers and touted as a
way to access your tax refund sooner. The tax preparer loans you an amount equal to your
anticipated refund, minus interest charges and fees, and then has your refund directed to their
account. In the following article, it states that in 2009 approximately 7 million taxpayers took
advantage of RALs and paid more than $650 million in interest and fees to receive their refund a
few weeks early. Read the following article and then answer a few questions.
http://www.aarp.org/money/taxes/info-03-2011/ask-sid-tax-refund-loans.html
Questions to pose:
1. How do RALs relate to the time value of money?
Answer: Individuals are obviously willing to accept a smaller sum today in lieu of a larger sum
at some point in the future. This example illustrates the concept of the time value of money,
or a dollar today is worth more than a dollar in the future.
2. What makes this practice unethical according to some critics?
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