My Students Are NOT Off To A Good Start

This semester I tried something a bit different in my security analysis class. Since the finance principles (i.e. required core finance) class is a prerequisite for this one, I always assumed that they had at least a fair grasp of the basics (like time value, using their financial calculator, constant dividend growth valuation, and so on). This time, the first day of class, I announced that they'd get a quiz at the beginning of the second week on "the basics). I figured this would serve two purposes: It would give me (and them) a better idea as to what they retain from their previous classes. And just as important, since it counted toward their grade, it would give them an incentive to review the material at the beginning of class. The questions I said I'd give them included:
  • A couple of questions on time value (PV of a lump sum, PV of an annuity, find the interest rate on the FV of an annuity)
  • A constant dividend growth stock valuation problem
  • A non-constant dividend growth valuation problem
  • An NPV problem
  • An IRR problem
  • A CAPM question
  • A basic question on financial statements
The results were eye-opening, and not exactly in a good way. Although the questions were pretty basic (except for the non-constant dividend growth problem), the average score was about 65, and only 3 out of the 45 students got a perfect score. Let's just say that it was a less than stellar grasp of the material. So, I told them that those who got less than 80% have a LOT of catching up to do.

After all, if they don't understand the basics, they surely won't get the more advanced material. And I simply don't have the time to review everything they're supposed to know from the class they supposedly already passed. After all, they ARE mostly finance majors.

At least I didn't teach the principles class, so I get to grouse about those who did...
It should be interesting. I think the herd may be losing a few slow antelopes shortly.