I have written an extra credit problem set on the topic of moral hazard that will be due (via email sent to firstname.lastname@example.org) by 5 p.m. on Monday, October 16 (see http://fin4335.garven.com/fall2017/moralhazardEC.pdf). The grade received on this assignment will replace your lowest problem set grade, so long as it is higher than your lowest problem set grade.
Here are some helpful suggestions concerning how to go about working this problem set. The key learning objective for this problem set is to understand how compensation contract design affects managerial incentives to look after the interests of the firm’s owners. For simplicity, I assume here that investors are risk neutral; thus, they expect the manager to maximize the expected value of profit. Put yourself in the shoes of a compensation consultant and show the relationship between contract designs and expected profits under the various compensation scenarios that are provided in the problem set.
At your option, you may solve this problem set by hand or by creating a spreadsheet model. If you rely upon a spreadsheet model, you’ll need to include the spreadsheet as a file attachment when you send it to the email@example.com email address. Although a spreadsheet model is not required, you’ll find that Solver will come in very handy, particularly for answering the questions posed in parts 3-5 of the problem set.
Here is a very worthwhile extra credit opportunity for Finance 4335. You may earn extra credit by attending and reporting on the Cyber Day Panel Discussion described below. In order to receive extra credit for this presentation, you must submit (via email sent to firstname.lastname@example.org) a 1-2 page executive summary of what you learn from this panel discussion. The executive summary is due by no later than 5 p.m. on Monday, October 9th. This extra credit will replace your lowest quiz grade in Finance 4335 (assuming the extra credit grade is higher).
Meir Statman has very important things to say about decision-making under risk and uncertainty; I introduced Professor Statman to you in my previous blog posting entitled “Your Tolerance for Investment Risk Is Probably Not What You Think.” Here is an extra credit opportunity for Finance 4335 based upon a 1 hour, 25 minute podcast (recorded in July 2017) hosted by Barry Ritholtz’s Masters of Business podcast (link provided below) entitled “Interview with Meir Statman.”
You may earn extra credit by listening to and reporting on Mr. Ritholtz’s interview with Meir Statman about behavioral finance. In order to receive extra credit for this assignment, you must submit (via email sent to email@example.com) a 1-2 page executive summary of what you learned from this podcast; it is due by no later than 5 p.m. on Monday, September 18. This extra credit assignment will replace your lowest quiz grade in Finance 4335 (assuming the extra credit grade is higher).
Bloomberg View columnist Barry Ritholtz interviews Meir Statman, the Glenn Klimek Professor of Finance at Santa Clara University. His research focuses on behavioral finance. He attempts to understand how investors and managers make financial decisions and how these decisions are reflected in financial markets. His most recent book is “Finance for Normal People: How Investors and Markets Behave,” published by Oxford University Press. This commentary aired on Bloomberg Radio.
I have decided to offer the following extra credit opportunity for Finance 4335. You can earn extra credit by building an Excel spreadsheet which replicates the Standard Normal Distribution Function table for positive z values ranging from 0.00 to 3.09 (in .01 increments). Helpful hint – you can obtain cumulative probabilities for all 310 z values (comprising 31 rows and 10 columns) by using the NORMSDIST function that is built into Excel.
This extra credit assignment must be emailed as a file attachment to firstname.lastname@example.org prior to the beginning of class on Thursday, September 7; I will not accept this assignment in any other way. I will use your grade on this assignment to replace your lowest quiz grade in Finance 4335 (assuming that your grade on the extra credit is higher than your lowest grade).
Here are a couple of upcoming extra credit opportunities for Finance 4335. You may earn extra credit by attending and reporting on 1) “The Triumph of the Entrepreneurial Spirit” (scheduled for 4-5:15 in Foster 240 on Thursday, September 14, and 2) “Economic Inequality: Popular Misconceptions and Important Facts” (scheduled for Thursday, October 19 scheduled for 4-5:15 in Foster 240 on Thursday, October 19. In order to receive extra credit for either or both of these talks, you must submit (via email sent to email@example.com) a 1-2 page executive summary of what you learn from each talk . The executive summary for the September 14th talk is due by no later than 5 p.m. on Monday, September 18th and the executive summary for the October 19th talk is due by no later than 5 p.m. on Monday, October 23rd. In both cases, the extra credit will replace your lowest quiz grade in Finance 4335 (assuming the extra credit grade is higher).