Carroll School of Management

Boston College
INVESTMENTS
MF 1151.02/MF 1151.03
Spring 2017
Professor Dmitriy Muravyev
Office: Fulton 330B
Phone: 617-552-0883
Email: muravyev@bc.edu
Office hours: Tuesday, 4:30 5:30 p.m. or by appointment
Lectures: MF 1151.02: Tuesday and Thursday, 1:30 p.m. - 2:45 p.m., Fulton Hall 115
MF 1151.03: Tuesday and Thursday, 3:00 p.m. - 4:15 p.m., Fulton Hall 115
Course Description
The course is a rigorous, quantitative introduction to portfolio choice and financial asset valuation.
The main topics of the course are arbitrage, portfolio selection, equilibrium asset pricing (CAPM),
multi-factor models, fixed income, and derivative pricing.

You are expected to understand valuation formulas and be able to apply them to new problems.
The appropriate tools necessary for solving these problems will be developed at each stage and
practiced in the homework assignments. The models we will cover have immediate applications
and implications for real-world financial decisions.
Prerequisites
MF 021 (Basic Finance). I will assume you are already familiar with basic algebra and basic
calculus. You are also expected to have an understanding of basic economic and statistical
concepts beforehand. From economics you should understand supply and demand curves. From
statistics you should understand mean, standard deviation, covariance, correlation, and regression
models. Familiarity with Excel is also expected.
Required Course Materials
Textbook: (BKM) Investments, by Bodie, Kane, and Marcus, 10th edition (Irwin/McGrawHill), 2013.
o Both paper-based and electronic versions are fine; 8th or 9th editions are budget
alternatives to 10th edition. You do not need to purchase Connect subscription this
year. Several copies of the textbook are reserved at the library.
Microsoft Excel or comparable spreadsheet software for homework
Communication
I will be posting class slides on the course website on Canvas. You are encouraged to check the
course webpage every few days. The relevant class slides will be posted before classplease make
sure to download the slides before coming to class.

Class Attendance, Participation, and Etiquette

The subject matter for this course (or any other finance course) is by nature quantitative. You will
study many formulas and equations. You do not need to memorize any of these formulas and
equations. The emphasis of this course is not on formulas and equations per se, but on
understanding the intuitions underlying them so that you will be able to approach and analyze
problems in a new setting based on the principles of economics and finance. I will try to explain
the concepts in several different approaches. Please do not hesitate to ask questions in class if
things that I say do not make sense to you. Attending classes and asking questions will be crucial
for you to learn and succeed in this course. You will be responsible for all the materials covered
and announcements made in class. Please ask your classmates for handouts, class notes and any
other relevant information if you miss a class.

I expect that you will (1) arrive on time for class, (2) complete the course assignments and required
readings, and be prepared for every class, (3) listen attentively, actively, and respectfully to
whomever is speaking in class, (4) thoughtfully participate in class discussion, (5) refrain from
activities that can distract other students such as chatting, checking email or browsing the internet
during the lecture, and (6) suggest ways in which I can make this class more challenging,
stimulating, and enjoyable. If you are unable to attend a class, I expect you to notify me in advance,
by e-mail.
Academic Integrity
It is assumed that everyone behaves ethically. I would like to stress that this includes doing your
OWN work. I treat ethics violations very seriously.
Course Grading
Grades are based on class participation (4%), six homework (15% total), two midterm exams (24%
each), and a final exam (33%)
Examination
There will be two midterms and a final exam administered in this course. All of them will be inclass, closed-book, and closed-notes. For the exams you are permitted to bring a calculator only
laptop computers, tablets and smartphones are not allowed during the examinations. You will be
provided with a formula sheet for the midterm and final exams.

No assistance may be given, received, or otherwise used during the exam. You should take the
exam at the scheduled time; exceptions will be made only for those situations outside your control
such as medical emergency, family emergency or an interview schedule requiring out-of-town
travel. The make-up exam will be offered at a time chosen by me and it will take into account the
earliest time that you are back in town in case of travel. Regardless of when you take the exam,
you may not discuss the exam with any other individual before the graded exams are returned.
Although rare, mistakes can be made in grading. Request for re-grades must be submitted in
writing within ten days of the day that the graded exams or cases are returned. I reserve the right
to re-evaluate your grade on the entire exam if you request a re-grade.
Problem sets
There are six problem sets for this course, which are designed to verify concept comprehension
and give you an opportunity to work with real-world data. Each assignment consists of two parts.

The first part has to be completed online at the course Canvas website (66% weight). You have
three attempts for each problem set. Also, each problem set includes an Excel practice problem
(33% weight). Your solution to this part is submitted through Canvas.
You can fail one problem set - the cumulative score is the sum of five best scores.
Office Hours
I will be available immediately after class for questions. I will also be available on Tuesdays 4:305:30pm in my office (Fulton 330B) or feel free to email for an appointment.
Questions/comments/suggestions can be e-mailed to me at any time.
Request for Accommodations
If you have a disability and will be requesting accommodations for this course, please register with
either Kathy Duggan (617-552-8093, dugganka@bc.edu ), Interim Director, Academic Support
Services, the Connors Family Learning Center (learning disabilities and ADHD) or Paulette
Durrett (617-552-3470, paulette.durrett@bc.edu), Assistant Dean for Students with Disabilities,
regarding all other types of disabilities. Advance notice and appropriate documentation are
required for accommodations.
Suggested Leisure Reading
Hedge Fund Market Wizards: How Winning Traders Win by Jack Schwager thought
provoking interviews with top hedge fund managers
You Can Be a Stock Market Genius by Joel Greenblatt introduction to event-driven
investing
Efficiently Inefficient by Lasse Pedersen a slightly deeper look into quantitative investing
Tentative Course Outline
Week 1: Introduction to Financial Markets (January 17, 19)
Introduction
Portfolio Risk and Return: BKM 5.4, 6.1; Recommended: BKM 5.1-5.3, 5.5-5.9

Week 2: Portfolio Theory (January 24, 26)

Portfolio Risk and Return (continued)
Week 3: Portfolio Theory (January 31, February 2)
Efficient Portfolios with Two Risky Securities: BKM 7.1-7.2
Efficient and Optimal Portfolios with Riskless Asset: BKM 6.2-6.6
Week 4: Optimal Portfolios (February 7, 9)
Efficient and Optimal Portfolios with Multiple Risky Assets: BKM 7.3-7.4
Week 5: Optimal Portfolios and Midterm (February 14, 16)
Optimal Portfolios (continued) & Review
Midterm Exam (February 16)
Week 6: Capital Asset Pricing Model (February 21, 23)
The Capital Asset Pricing Model: BKM 9.1; Recommended: BKM 9.3-9.6

Week 7: CAPM Applications (February 28, March 2)

Applications of the CAPM: BKM: 8.1-8.3, 9.2; Recommended: BKM 8.4-8.5
Week 8: Spring Break (March 7, 9)
No classes
Week 9: Arbitrage and APT (March 14, 16)
Arbitrage and Arbitrage Pricing Theory: BKM 10
APT Applications/ Multi-Factor Models in Practice
Week 10: Market Efficiency (March 21, 23)
Market Efficiency and Behavioral Finance: BKM 11, 12
Week 11: Equity Valuation and Midterm (March 28, 30)
Dividend Discount Models and Valuation Ratios: BKM 18.1-18.4
Midterm Exam (March 30)
Week 12: Fixed Income (April 4, 6)
Bond Prices and Yields: BKM 14.2-14.4; Recommended: BKM 14.1, 14.5
Yield Curve and Forward Rates: BKM 15
Week 13: Fixed Income (April 11, 13)
Duration and Immunization: BKM 16.1-16.3; Recommended: BKM 16.4
Easter WeekendNo classes on Holy Thursday
Week 14: Options (April 18, 20)
Options Basics and Strategies: BKM 20.1-20.3; Recommended: BKM 20.5-20.7
Week 15: Option Pricing (April 25, 27)
Options Strategies and Price Bounds: BKM 20.4, 21.1-21.2
Black-Scholes Option Pricing Formula: BKM 21.4-21.5; Recommended: BKM 21.6
Week 16: Final Week (May 2, 4)
Options (continued)
Review Session
Final Exams:
MF 1151.02: Tues, May 9, 12:30 p.m. Fulton 115 (regular room)
MF 1151.03: Sat, May 13, 12:30 p.m. Fulton 115 (regular room)
Final exam schedule can be found at
http://www.bc.edu/offices/stserv/academic/current/exams.html#finals-spring
University-wide academic calendar can be found at
http://www.bc.edu/offices/stserv/academic/current/calendar.html#spring2017