Syllabus

UGBA 103 Introduction to Finance – Spring 2020

instructor: Professor Dmitry Livdan

office: F632, Haas Faculty Building
email: livdan@haas.berkeley.edu
office hours: Monday: 5:30-7:00 PM @ F489

class time: UGBA103-1 M&W 12:30PM - 2:00PM Chou Hall N100

UGBA103-2 M&W 2:00PM - 3:30PM Chou Hall N100

GSIs:
Dominik Jurek (dominik_jurek@haas.berkeley.edu) Sections: 101, Fri 9:30-11:00AM RM:
Cheit C110; 102, Fri 12:30-2:00PM RM: Cheit C220; 103, Fri 3:30-5:00PM RM: Chou N170;
OH: TBD

Sooji Kim (sooji_kim@haas.berkeley.edu) Sections: 201, Fri 8:00-9:30AM RM: Cheit C110;
202, Fri 12:30PM - 2:00PM RM: Chou N170; 203, Fri 2:00-3:30PM RM: Chou N170; OH:
TBD

class reps: Section 01:

Section 02:
overview: This is an introductory course in finance. Students learn how to value assets given forecasts of future
cash flows. The course also concentrates on the risk characteristics of different asset classes. The first
part of the course focuses on the decision rules under certainty. The second part of the course deals
with measuring and pricing risk. The third part of the course introduces students to valuation. The
final part of the course deals with financing decisions. The course will combine the theoretical
underpinnings of finance with real world applications.

homepage: We will be using bCourses, MyFinanceLab, and study.net.

Syllabus for UGBA 103 – Spring 2020 page 1

required text: Corporate Finance by Berk and DeMarzo Plus MyFinanceLab with Pearson eText -- Access Card
Package, 4/E, ISBN 13: 9780134426792

.
 MyFinanceLab – You will need the My Finance Lab Access Kit (see below): This kit is already
included in the book versions you can buy on campus.
Course ID for Section 01: livdan10472
Course ID for Section 02: livdan75807
 Other editions will not be supported. It is your responsibility to check whether the overlap is high
enough. Important note: If you buy a used book, previous edition or international version of the book
you need to buy a separate license at: http://www.myfinancelab.com/register

Study.net Can be accessed at https://www.study.net/berkeley/Default.asp. The course IDs are:

Course ID for Section 01: UGBA103_F2020
Course ID for Section 02: UGBA103_F2020

also required:  Any calculator that can calculate an IRR (internal rate of return) is sufficient for this class, but we
recommend that you purchase a HP 12C financial calculator, which has several other financial
functions. There are two versions, regular and platinum. You may want to buy the platinum version,
which is slightly more expensive, but which allows regular notation in addition to reverse polish
notation (RPN). If you do not know what reverse polar notation is, it is recommended you buy the
platinum version. The GSIs will ONLY support the calculator HP 12C.
 Access to a computer with Microsoft Excel (or comparable spreadsheet program) to complete some
homework assignments.
optional texts: For students who like bedtime reading: A Random Walk Down Wall Street Seventh Edition, by
Burton Gordon Malkiel, W.W. Norton & Company; Paperback - June 2000.
An advanced treatment of the material we cover is given in Financial Theory and Corporate Policy, by
Thomas Copeland and Fred Weston, Addison Wesley, 1992.

readings: You are expected to do the assigned readings before each class. Time does not allow all topics to be
covered in detail in the class room. Therefore, the readings are necessary. You are responsible for all
material covered in assigned readings, whether or not we have time to cover it in class. Reading
ahead is expected as it will aid your understanding of material presented in class. Re-reading after class
is encouraged as it will help solidify the concepts just presented.

attendance: Attending class and GSI sessions will help you learn the material, aid class discussions, and benefit your
fellow students. Please attend all classes, and be in your seats, ready to work at the beginning of class.
Of course, a few students might miss class on rare occasions due to illness or family emergencies. This
is to be expected. Attending part of a class (arriving late or leaving early) is not an option. Attendance of
the GSI session is mandatory.

preparation: The median student will spend about 10 hours per week (2 hours per day) studying finance outside of
class. Time should be spent doing problem sets, practice problems, preparing case studies, reading the
textbook, and reviewing class notes.

grades: Your overall course grade will be based on: home works (from MyFinanceLab), one midterm, GSI
section attendance, and a final exam.

Cases + Homeworks: 20.0 %

Attendance GSI section 10.0%
Mid-term: 35%
Final Exam: 35.0%
Total 100.0 %

Syllabus for UGBA 103 – Spring 2020 page 2

sections: GSI-run sections are provided to help students review the course material on a weekly basis. You need to
attend at least 10 out of 13 sessions to get full credit. (You get 1 point for each GSI session) This is an
excellent time to ask questions outside the classroom.

mid-term: There is one in-class midterm on March 18, 2020. All students must take the exam at this time - no
exception. A midterm is worth 35% of the course grade. To get a regrade you must write an
explanation within 5 days of getting your midterm back.

final exam: There is a final exam in this course, on May 12, 11:30 – 2:30PM room TBD for lecture 2, and May
13, 3:00 – 6:00PM room TBD for lecture 1. All students take the exam at this time – no exceptions.
There will be no regrade for the final exam!

homeworks: To learn finance, we suggest you do a large number of problems. Doing problems has been proven to
be the best (only) way to learn finance. The assigned home works (see MFL) have to be completed by
the due date. The two lowest scores on the homework will not enter your homework grade.

cases: Students are required to complete and hand in 3 cases during the semester. Cases should be solved in
groups. A group should consist of 4 students. In exceptional cases, we allow group sizes of 3 or 5
students. Cases will be discussed in class and students should be ready for cold calling.

additional problems:

I will provide a list of suggested questions from each chapter.

grade options: Students have two (mutually exclusive) options:

1. Drop the mid-term score, and have the final count for 70% of the final grade. However, this
option is valid only if the midterm has been taken.
2. Drop Case+Homeworks and Attendance GSI section and having the final count 65% of the
final grade. NOTE: Midterm’s participation is mandatory. If you do not attend the midterm
and also miss the final you cannot opt for an “incomplete!” The most beneficial option is
automatically invoked at the end of the course!

cheating: If you are caught cheating in one exam (midterm or final) you will automatically fail the class. No
excuses!

ethics and etiquette:

Students who take this class are bound by the Haas code of ethics. For reference please see:
http://www.haas.berkeley.edu/Undergrad/ethicscode.html. Nothing less than strict adherence will be
accepted. In certain situations (cases) students may work together in small groups of no more than five.
In the case of homework problem sets, each student is still responsible for submitting, understanding,
and being able to complete the case on his or her own.

We ask students to refrain from behavior that has been demonstrated to interfere with a positive
classroom experience. This especially includes holding any type of side conversation (voice, electronic,
telepathy, etc.) and using laptops or/and smartphones/PDAs to surf the Web, check e-mail, etc

topics and assignments:

All chapters refer to Berk and DeMarzo 4th U.S. edition. For simplicity, topics and readings are
presented as full lectures. Some topics may run over to the next lecture. Consequently, we may fall
behind the listed schedule a bit at some points and then catch up soon thereafter. In addition, assignments
may change during the semester. Any changes will be listed on bCourses. Note: Readings should be done
before class.

Syllabus for UGBA 103 – Spring 2020 page 3

Jan 22, 2020 topic: Introduction (week #1)
readings: Chapter 1:The Corporation
Chapter 4: The Time Value of Money;
Lecture Notes (Part 1): Slides 1-19

Jan 27-29 topic: Introduction, Time Value of Money (week #2)

due: HW1 on Feb 16 (Midnight)
readings: Chapter 4: The Time Value of Money;
Chapter 5.1: Interest Rate Quotes and Adjustments;
Lecture Notes (Part 1): Slides 21-80
Practice Problems (Chapter 4): 5, 6, 7, 8, 13, 16, 17, 21, 26, 34.

Feb 3-5 topic: Interest Rates (week #3)

readings: Chapter 5: Interest Rates, Sections 3-5

Lecture Notes (Part 1): Slides 81–91

Feb 10-12 topic: Fixed income valuation; Fundamentals of Capital Budgeting (week #4)

readings: Chapter 6: Valuing Bonds

Lecture Notes (Part 1): Slides 92–122
Practice Problems (Chapter 6): 2, 6, 10, 17, 20.
Chapter 3: Section 3.3 – The NPV Rule
Chapter 7: Fundamentals of Capital Budgeting
Lecture Notes (Part 1): Slides 123–135

Case: 1. HBS Case 9-298-080: Fixed income valuation (questions 1, 2 and 3)

Feb 19 topic: Fundamentals of Capital Budgeting (week #5)

due: HW2 on Mar 08 (Midnight)

readings: Chapter 8: Fundamentals of Capital Budgeting

Lecture Notes (Part 1): Slides 136–175
Practice Problems (Chapter 8): 2, 4, 6, 8, 10, 12, 13, 17

Feb 24-26 topic: Other Decisions Rules; (week #6)

readings: Chapter 7: Investment Decision Rules

Lecture Notes (Part 1): Slides 175–208 (End of Part 1)

Case: 2. HBS case # 9-298-092: Valuing capital investment projects

Mar 2-4 topic: Statistics Overview; Statistics and Stock Portfolios (week #7)

readings: Chapter 10: Capital Markets and the Pricing of Risk (Sections 1-4)
Lecture Notes (Part 2): Slides 1-28
Chapter 11: Optimal Portfolio Choice (Sections 1-2)
Lecture Notes (Part 2): Slides 29-42

Syllabus for UGBA 103 – Spring 2020 page 4

 Practice Problems (Chapter 11): 1, 2, 12, 16, 19

Mar 9-11 topic: Statistics and Stock Portfolios; CAPM (week #8)

due: HW3 on Apr 12 (Midnight)

readings: Chapter 11: Optimal Portfolio Choice (Sections 3-4)

Lecture Notes (Part 2): Slides 42-55 & 56-76
Practice Problems (Chapter 11): 21-25, 31, 32
Chapter 11: Optimal Portfolio Choice (Sections 5-8)
Practice Problems (Chapter 11): 38, 45-48, 50

Mar 16 topic: Review for Midterm exam (week #09)

readings: Everything covered up to this week

Mar 18 topic: Midterm exam (week #09)

readings: Everything covered up to this week

Mar 30-Apr 01 topic: CAPM (weeks #10)

readings: Chapter 12: Estimating Cost of Capital (Sections 1-3)

Lecture Notes (Part 2): Slides 76–107
Practice Problems (Chapter 12): 1-3, 6

Apr 06-08 topic: Valuing Stocks (week #11)

readings: Chapter 9: Valuing Stocks (Except Section 5)

Lecture Notes (Part 2): Slides 108–158
Practice Problems: 1-15, 17

Apr 13-15 topic: Debt Policy with and without Taxes (weeks #12)

readings: Chapters 14&15

Lecture Notes (Part 3): Slides 1–37
Practice problems: 1-4, 6, 8, 13, 15-17 from Chapter 14
Practice problems: 1, 3, 6, 8, 14, 18, 19 from Chapter 15

Apr 20-22 topic: Debt Policy with and without Taxes

Debt Policy – Other Explanations (week #13)
due: HW 4 May 07 (Midnight)

readings: Chapter 16
Lecture Notes (Part 3): Slides 38–52

Case 3: HBS case # 9-291-051: Pinkerton A

Syllabus for UGBA 103 – Spring 2020 page 5

Apr 27-29 topic: Interaction of Investment and Financing Decisions (week #14)

readings: Chapter 18
Lecture Notes (Part 3): Slides 53–91
Practice problems: 7-9.

May 04 topic: Review for Final exam (week #15)

readings: Everything covered up to this week

May 12, 11:30 – 2:30PM topic: Final Exam for Section 02

May 13, 3:00 – 6:00PM topic: Final Exam for Section 01

Syllabus for UGBA 103 – Spring 2020 page 6