In my blog entry of October 22, 2012 entitled “The Mid-Term as a Diagnostic Tool,” I wrote the Mid-Term serves among the following purposes in my class: It is a diagnostic tool for assessing student learning progress to date, its outcomes are useful in refining student preparation strategies, and its results make it possible to refine teaching emphasis for the remainder of the semester.
I also observed that the Mid-Term exam revealed a substantial student performance gap between the True-False/Multiple Choice questions and the short case. This outcome indicated that students were familiar with the theories and concepts covered in the textbook, but had great difficulty applying them. Based on that outcome, I had planned to refine my teaching approach for the remainder of the semester. The revised approach would see less instructional time devoted to theories and concepts and a larger portion to problem-solving and case discussion.
One of the content areas I had covered since the Mid-Term concerned the basics of investing. Relevant subject matter included the relationship between risk and the rate of return; risk management through diversification; making investment choices based on one’s financial situation, tolerance for risk, and personal values; investment options ranging from equities to debt instruments, classifications of stocks; bond ratings; retirement plan options; and, sources of investment information.
Afterward, going beyond the questions provided in the textbook, I presented my class with a case study. The case provided information including but not limited to:
- A hypothetical investor’s career, income, financial position, and goals. The hypothetical investor was in a reasonable position to tolerate the risk associated with the securities markets and was seeking growth.
- Two investment possibilities: A 5-year CD yielding 1.05% or investment in shares of stock of a given company.
- The company’s share price, its dividend, and recent sales and earnings history.
- A SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis for the company.
- Information from the company’s 10-K related to its business strategy, market and distribution, competition, and intellectual property was provided.
- General macroeconomic information.
My students were asked to calculate such measures as the company’s dividend yield, determine what investment made the most sense from an income (not growth) perspective, identify the factors that would lead one to invest in the company’s stock, identify the factors that would discourage one from investing in the company’s stock, weigh those factors and prioritize them consistent with the hypothetical investor’s situation and goals, and then to reach a conclusion as to whether the hypothetical investor should buy the company’s stock or place her money in the 5-year CD.
The macroeconomic information was based on the U.S. economic performance during the relevant timeframe. The company’s financial data, 10-K information, SWOT, and other market information was adapted from Apple, Inc. and its industry. There were both opportunities and risks associated with the investment.
Most of my students were able to identify many of the factors that were relevant to making an informed investment decision. Most also correctly made the recommendation that the investor should buy the shares of stock. For the relevant investment timeframe, Apple’s stock wound up tripling in value.