International Finance (FIN 330)
Dr. Robert T. LeClair
2015 Summer Session 1
MTWTh: 11:00 am – 12:50 pm
Course
Textbook
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Foundations of Multinational Financial Management, 6th Edition by Alan C. Shapiro and Atulya
Sarin, John Wiley & Sons, Inc., 2009.
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Scope of the Course
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A survey of the principles
and concepts of international financial management. The key financial decisions of the
multinational firm will be examined and analyzed. The course will build on and extend the
valuation framework provided by domestic corporate finance to account for
dimensions unique to international finance.
There will be an emphasis on taking advantage of opportunities
provided in the multinational environment as well as recognizing the threats
and risks in doing business abroad.
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Course Grading
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Your final grade in the
course will be based on a series of five weekly quizzes covering the chapters
assigned for the week. Each quiz will
be equally weighted at 12% of the final grade and the total weight of the
quizzes will make up 60% of your overall score. The remaining 40% of the final grade will
be based on the individual country report.
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Course
Schedule
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Week of:
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Textbook
Chapters
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Topics
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25 – 28 May
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Chapter 1
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Multinational Enterprise and Multinational Financial
Management:
· The nature and benefits of globalization
· Multinationals in international competition
· The motivation for FDI
· Stages of corporate expansion overseas
· Video: “Managing
the Overseas Assignment”
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Chapter 2
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The Determination of Exchange Rates:
· The equilibrium exchange rate
· Factors affecting exchange rates
· Currency appreciation and depreciation
· Central bank intervention
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Chapter 3
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The International Monetary System:
· Varying systems of exchange rate determination
· The European Monetary System
· European Monetary Union and the Euro
· The gold standard
· Video: “What
in the World is a Dollar Worth?”
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Chapter 4
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Parity Conditions in International Finance:
· The Law of One Price
· The function of arbitrage
· Real and nominal interest rates
· Forecasting exchange rates
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1 – 4 June
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Chapter 5
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The Balance of Payments and International Economic
Linkages:
· Balance of payments accounts
· The linkage between current and financial accounts
· Managing a current account deficit
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Chapter 6
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The Foreign Exchange Market:
· The spot and forward markets
· Different foreign exchange quotations
· Currency arbitrage operations
· Using forward contracts
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8 - 12
June
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Chapter 7
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Currency Futures and Options Markets:
· Forward and futures contracts
· Currency options contracts
· Managing currency risk
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Chapter 9
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Managing Transaction Exposure:
· Translation vs. transaction exposure
· Hedging transaction exposure
· The cost of hedging techniques
· Centralized foreign exchange risk management
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15 – 18
June
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Chapter 11
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Country Risk Analysis:
· Defining country risk
· Social, cultural, political, and economic factors
affecting country risk
· Key indicators of country risk
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Chapter 15
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Financing Foreign Trade:
· Making payments in international trade
· Documents associated with payments
· Costs and benefits of factoring
· Countertrade transactions
· Short-term overseas financing
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Chapter 16
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Managing the Multinational Financial System:
· Transfer mechanisms used by multinational firms
· Arbitrage opportunities available to MNCs
· Shifting profits and funds internally
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22 - 25 June
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Investment Reports and Presentations Due
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International
Finance:
Country Report
You are to prepare a report covering the country that you
have been assigned to follow during Summer Session I. Place yourselves in the role of financial
analysts for a medium to large size corporation engaged in manufacturing a
wide range of consumer electrical products, such as toasters, food
processors, hair dryers, radios, etc.
The corporation is considering a potential business venture
(manufacturing) in this country for the first time. The legal nature of this investment (i.e.,
corporation, joint venture, stock ownership, etc.) is undecided at this
time. Your report may influence the type
of structure selected for the investment.
You may design the report in any manner that you wish. However, certain information must be included
so that a reasonable and informed investment decision can be made. These essential areas would cover, but not
necessarily be limited to, the following:
· a brief description of the country
· general economic importance
· recent economic history (last 1-3
years)
· political structure and stability
· major imports and exports
· currency and foreign exchange
considerations
· trade relationships with other
countries
· risk factors for potential investments
While there is no required length, the main body of the
paper should not be longer than five typed, double-spaced pages. The paper should be appropriately footnoted,
and include a bibliography of sources that you have worked with in preparing
the report. Charts, graphs, tables, and
similar materials may be placed in an appendix to the paper which does not
count toward the five page limit. End
notes are acceptable. Papers are due no
later than Tuesday, June 23, and
will be penalized if submitted after that date.
This report will represent 40% of your final grade in the course.