INTERNATIONAL FINANCE

BUS 627
Spring 2004

Instructor: Dr. Shehzad Mian

Office Hours: TBA
Telephone: 727-2755 (Room 512)

Finance Area: Denise West (727-7840)

Textbook: Alan Shapiro's Multinational Financial Management

(7th Edition)

Grading:
35% Test #1 (March 4)
40% Test #2 (Final Exam Week)
5% Quiz #1 (February 19)
5% Quiz #2 (April 8)
10% Group Project (Limit: 5 students/group)
5% Class Participation/Effort

Tests

Test #1 will likely comprise chapters 2-7 and some portion of chapter 8 depending on
class speed.

Test #2 will comprise chapters 7-11,14,15,17, and 20.

End-of-Chapter Questions and Problems

Solutions will not be collected for grading. I will either discuss these questions/problems
in class or provide written solutions. Timing-wise, questions/problems for each chapter
will be due for class discussion in the class session that follows the completion of a
particular chapter. So if a chapter is finished on a Tuesday, please be prepared with
solutions in the following class on Thursday.
Topic Outline

1. Introduction to the Course

2. The determination of exchange rates (Chapter 2)

A. Models of exchange rate determination

B. Central bank intervention

Chapter 2
Questions: 2,3,4,5,7
Problems: -

3. The international monetary system (Chapter 3)

A. History of international monetary system

B. Alternate exchange rate systems
C. Historical experience

Chapter 3
Questions: 1,4,5,6,7,8,9,10
Problems: -

4. Parity conditions in international finance and currency forecasting (Chapter 4)

A. Purchasing power parity

B. Fisher effect
C. International Fisher effect
D. Interest Rate Parity
E. Currency forecasting

Chapter 4
Questions: 5,6,8,10,11,13,15
Problems: 7a,9,11,13,14

5. The balance of payments and international economic linkages (Chapter 5)

A. Balance of payment accounts

B. Coping with current account deficit

Chapter 5
Questions: 1,2,6,7,8,9,10
Problems: -
6. Country Risk (Chapter 6)

A. Determinants of economic health

B. Impact of policy choices

Chapter 6
Questions: 3,4
Problems: 1,4,8,9,10

7. The foreign exchange market (Chapter 7)

A. Spot market
B. Forward Market

Chapter 7
Questions: 1
Problems: 1,2,5a,5b,6,10

8. Currency futures and options markets (Chapter 8)

A. Futures contracts
B. Currency options

Chapter 8
Questions: 2
Problems: 3,4,5,7,8,10

9. Currency swaps (Chapter 9)

A. Currency swaps
B. Kodak-Merrill Lynch swap

Chapter 9
Questions: -
Problems: 1,2

10. Measuring and managing translation and transaction exposure (Chapter 10)

A. Alternate translation methods

B. SFAS 52
C. SFAS 133
D. Transaction exposure
 Chapter 10
Questions: 4,,5,6,9,12,14,15
Problems: 1,2,9,10

11. Measuring and managing economic exposure (Chapter 11)

A. FX risk and economic exposure

B. Economic consequences of FX rate changes
C. Identifying and estimating economic exposure

Chapter 11
Questions: 1,5,8,9,10
Problems: 1,5,7,9

12. The cost of capital for foreign investments (Chapter 14)

A. Cost of capital for foreign projects

B. Illustration: Bank of America approach

Chapter 14
Questions: 5,6,8,9
Problems: -

13. International portfolio investment (Chapter 15)

A. International equity investing

B. International bond investing
C. Global, Country, Industry, and Firm-Specific Factors

Chapter 15
Questions: 1,9
Problems: 8

14. Capital budgeting for the multinational corporation (Chapter 17)

A. Alternative capital-budgeting frameworks

B. Issues in foreign investment analysis
C. Growth options and project evaluation

Chapter 17
Questions: 10
Problems: -
15. Managing the MNC financial system (Chapter 20)

A. Value of the MNC financial system

B. Inter-company fund-flow mechanisms
C. Designing a global remittance policy

Chapter 20
Questions: 1,3,4
Problems: 1,2,3,4,5