2011 - 2012

Finance BBA

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Update to previous cycle's plan for continuous improvement

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Plan for continuous improvement

Feedback from assessment of student performance in individual courses yielded little in the way of information supporting an assessment of the Finance BBA major. The committee met multiple times in order to formulate the goals of major assessment. The committee determined that the effectiveness of the Finance BBA major would best be assessed if elementary concepts and capabilities were assessed in the foundational course, FINC 3320, and then at advance levels in subsequent required finance courses.

In order to accomplish this, the committee researched the FINC 3320 list of embedded questions to see where specific capabilities of majors might be tracked as the student progresses through the curriculum. Among the embedded questions in FINC 3320, the following questions were selected as indicators of basic knowledge and capabilities that could be assessed again at advanced levels in FINC 4390 (Managerial Finance) and FINC 4345 (Investments):
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6.             [LO 3] You just bought a new computer for $3,000.  The payment terms are 2 years same as cash.  If you can earn 8.0% on your money, how much should you set aside today in order to make the payment when due in two years?
A.            $2,572
B.            $2,778
C.            $3,000
D.            $3,499
7.             [LO 3] Your auto dealer gives you the choice to pay $15,500 cash now, or make three payments: $8,000 now, $4,000 at the end of year 1 and $4,000 at the end of year 2.  If your cost of money is 8.0%, what is the PV of the installment plan?
A.            $15,133
B.            $15,500
C.            $16,000
D.            $17.971

8.             [LO 3] What is the present value of a $1,000 perpetual cash flow if your required return is 10%?
A.            $909.09
B.            $1,000.00
C.            $10,000.00
D.            $100,000.00

9.             [LO 3] What is the present value of a 20 year annuity of $1,000 each year if your required return is 10%?
A.            $1,000.00
B.            $8,513.56
C.            $10,000.00
D.            $100,000.00

11.          [LO 4] What is the value of a stock that expects to pay a $3.00 dividend next year, and then increase the dividend at a rate of 8.0% per year, indefinitely?  Assume a 12.0% expected return.
A.            $25.00
B.            $69.44
C.            $75.00
D.            $81.00

15.          [LO 5] What type of project analysis involves altering particular combinations of (multiple) assumptions?
A.            Sensitivity Analysis
B.            Scenario Analysis
C.            Break-Even Analysis
D.            Real Option Analysis

16.          [LO 6] Given the following information, determine which beta coefficient for Stock A is consistent with equilibrium: Expected return of Stock A = 11.3%, rf = 5.0%, rm = 10.0%
A.            0.86
B.            1.26
C.            1.10
D.            0.80

17.          [LO 6] The most common measure of volatility used in finance is ________.  (Hint: This measure of volatility is defined as the average value of squared deviations from the mean.)
A.            expected return
B.            variance
C.            correlation
D.            beta

18.          [LO 6] Risk that CAN BE eliminated through proper diversification is called
A.            Unsystematic risk
B.            Unique risk
C.            Idiosyncratic risk
D.            All of the above
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I. Questions 6-9 from the embedded questions from FINC 3320 are covered at advanced levels in both FINC 4345 and FINC 4390. These questions test basic knowledge of time value of money.
In the FINC 4390 course, a case assignment involving advanced use of time value of money applied to a real scenario is required. The assignment involves use of custom programming in Excel to solve a timing question for eight different accounts with differing payments, balances, and compounding frequencies. Successful completion of the case indicates an advanced knowledge of time value of money.  In the FINC 4345 course, two advanced time value of money exercises will be administered. Successful completion of these assignments indicate an advanced knowledge of time value of money.


II. Question 11 from the FINC 3320 embedded questions is covered at an advanced level in the FINC 4390 course. The FINC 4390 advanced exercise will be used to examine student performance at the advanced level.
In the FINC 4390 course, an advanced exercise requiring calculation of the cost of external equity financing using a multi-tier nonconstant growth model will be administered.  In the FINC 4390 course, an embedded question is used to determine students' mastery of nonconstant dividend growth models, a natural extension of the more basic constant growth models from the FINC 3320 course.  Mastery of these exercises will indicate an advanced knowledge of valuation and capital costs.

III. Question 15 from the FINC 3320 embedded questions is covered at the advanced level in FINC 4390. The FINC 4390 assignment will be used to determine students' mastery of sensitivity and scenario analysis.


IV. Question 18 from the FINC 3320 embedded questions is covered at the advanced level in FINC 4345. An assignment requiring students to demonstrate ability to diversify risk and to trace the risk measures as they make decisions about investments within a portfolio will indicate students' mastery of the concept.

The advanced requirements will be tracked for Finance BBA majors in FINC 3320 in Fall 2013 and in FINC 4390 and 4345 in Spring 2014. 

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