ECO 375: Money, Banking, and Financial Markets

Marymount Manhattan College

Course Syllabus, Spring 2009

Instructor: Michael Crook

Email: mcrook@mmm.edu
Phone: 347-276-0175

Course schedule: Thursday Evenings, 7:15-9:55pm

Office hours: 6:30-7:15 pm Thursdays or by appointment. Office hours held in the Accounting and
Business office, 5th Floor

Required Textbook: Financial Markets and Institutions. Jeff Madura. 8th Edition.
Class Blog: http://eco375.wordpress.com/

Non-textbook required readings will be posted on the class blog. Students are expected to check the
blog every Monday for posted readings and complete them before class on Thursday.

Course Description

This course is a study of the theory and practice of financial markets and institutions. Specific focus
will be placed on the role of these markets and institutions in the financial market crisis of 2007-2009.

The class will examine the role that major financial institutions play in the modern economy.
Institutions covered will include the Federal Reserve, depository institutions (commercial banks, credit
unions, etc.) and nondepository institutions (pension funds, insurance companies, mutual funds, hedge
funds, among others).

The majority of the course will be focused on the theory and functioning of debt markets, equity
markets, and derivative markets. Topics covered include the structure of interest rates, money markets,
bond markets, bond valuation, equity market functioning, equity valuation, and options markets as well
as the risk and return characteristics for participants in these markets.

In general, the first half of each class will be devoted to discussing theories and concepts related to
markets and institutions. After a 10-minute break, the second half of each class will be devoted to
applying these concepts in the real world – particularly within the context of the recent market crisis.

Grading will be based on a variety of factors. 20% of the final grade will effectively be based
participation: pop quizzes, homework, and in-class participation. 40% of the grade will be based on in-
class testing (mid-term and final exam). Finally 40% of the grade will be based on a four essays.

Course Schedule

The Financial System and Monetary Policy

Week 1, 2/4: Introduction and a framework for understanding the progression of the course (Chapter 1)
Week 2, 2/11: Role of central banks and monetary policy (Chapters 4 and 5)

Interest Rates
Week 3, 2/18: Determination and Structure of Interest Rates (Chapters 2 and 3)

Financial Markets: Debt Markets

Week 4, 2/25: Money Markets (Chapter 6), Essay 1 due
Week 5, 3/4: Bond Markets (Chapter 7)
Week 6, 3/11: Bond Valuation and Risk (Chapter 8)

Financial Markets: Equity Markets

Week 7, 3/18: Primary and secondary equity markets (Chapter 10), Essay 2 due
Week 8, 4/1: Stock Valuation and Risk (Chapter 11), Midterm

Financial Markets: Derivative Markets

Week 9, 4/8: Futures markets (Chapter 13)
Week 10, 4/15: Foreign Exchange Markets (Chapter 16), Essay 3 due
Week 11, 4/22: Options Markets (Chapter 14) and Interest Rate Derivative Markets (Chapter 15)

Financial Market Regulation

Week 12, 4/29: Regulation of financial markets and institutions (Chapter 18)
Week 13, 5/6: Final reflections on The Panic of 2007-2010 and its impact on markets and institutions

Week 14, 5/13: Review, Essay 4 due

Week 15, 5/20: Final Exam (Not cumulative)

Grading

In-class participation/homework: 20%

Midterm: 20%
Essays (4 @ 10% each): 40%
Final Exam: 20%

There will be no extra credit given. Homework and papers are due at 7:20 pm on the due date. Late
homework and papers will be penalized by 1 letter grade immediately, and an additional letter grade
per 24-hour period.

Testing policy: All exams must be completed during the class period specified in the syllabus. No make
up exams will be given except in extenuating circumstances, like illness, and only at the instructor’s
discretion. Students taking make-up exams will receive an alternate version of the exam. Illnesses must
be documented by a physician and the Office of Student Affairs.

Specific Learning Goals: Upon course completion, students will be able to:

• Describe the role of financial intermediation in the current financial system

• Explain why yields vary among securities
• Explain interest rate movement in financial markets
• Analyze the traditional function of the federal reserve system and the expanded role the Federal
Reserve took in the recent financial crisis
• Explain how monetary policy influences interest rates and other economic decisions
• Identify major debt and equity security markets and explain how they are utilized by market
participants
 • Explain and apply concepts related to equity and bond valuation
• Outline the basic concepts and types of derivatives (options, swaps and futures)
• Explain, discuss, and articulate theories of financial system regulation
• Analyze and discuss the recent proposals for bank regulation
• Explain and discuss the role of various financial institutions and markets in the recent financial
crisis

Relationship to Program Goals: The learning goals are related to program goals as follows:

Program Goal 1: Business Functions: Students will demonstrate knowledge of concepts related to
financial markets and institutions. The concepts will include functions and role of the Federal Reserve
Bank, valuation of securities, market efficiency, and the role of financial institutions and global
financial markets.

Program Goal 2: Critical Thinking Skills: Students will internalize critical thinking skills using
concepts in economics and finance to evaluate the function and role of the Federal Reserve, equity and
bond valuation methodologies, current issues in regard to financial reform and financial market
regulation. The role and performance of the Federal Reserve in the current financial crisis will be
discussed and evaluated.

Program Goal 3: Quantitative and Technological Skills: Students will use quantitative skills to solve
problems related to valuation and risk in money markets, bond markets, and mortgage markets.
Students will use dividend yields and P/E ratios to examine stocks.

Program Goal 4: Domestic and Global Environment of Business: Case studies and problems will be
used to apply basic concepts in analyzing domestic and global issues related to financial markets and
regulation. Students will debate the ‘too-big-to-fail’ issue as well as proposed regulation.

Program Goal 5: Communication skills: Small group discussions, individual writing assignments
assigned as HW questions and oral presentations will be used to demonstrate professional writing and
speaking skills relating to current economic and financial issues.

Program Goal 6: Ethical Analysis of Business Conduct: Case studies, group discussions and writing
assignments will be used to discuss ethical principles in financial market regulation.

Academic Honesty Policy

MMC fosters an academic community where students and faculty work together to create a learning
experience that imparts knowledge and forms character. To achieve this, the College requires all
members of the community to adhere to the policy of Academic Honest that can be found in the
Student Handbook, the College Catalog, and the College website.

Statement on Accommodations for Students with Disabilities

Students with disabilities who require reasonable accommodations or academic adjustments for this
course must either enroll in the Program for Academic Access or register with the Office of
Disabilities. For any accommodation, the instructor must be presented with either a letter from the
Assistant Director of the Program for Academic Access or an Accommodations Card from the Office of
Disabilities during the first week of classes.