FINANCE 5331 - 001
International Finance
Fall, 2009
Monday and Wednesday 5:30 – 6:50 p.m., Room 153 B
Dr. Peggy E. Swanson
Office: 625B
Phone: 272-3841
e-mail:
http://www2.uta.edu/swanson
Office Hours:
Monday and Wednesday 4:00 – 5:00 p.m.
Other times available by appointment
I. Course Description
International Finance (3-0). Examines ways in which financial decision-making processes are altered by operation in a multinational environment. Includes the effects of devaluation expectations, foreign exchange and investment controls. Also, case study materials related to actual decisions by multinational firms.
II. Prerequisite
FINA 5311 or equivalent
III. Objectives of the Course
Financial management in an international context differs significantly from the domestic situation. This course emphasizes the diverse impacts arising from operations being conducted under different political and governmental constraints and in different currency denominations. During the semester, students will study, among other things, the impact on financial management of balance of payments, foreign exchange markets, foreign exchange risk, political risk, and offshore financial markets. At the conclusion of the course the students will be able to:
1. evaluate different international monetary systems
2. analyze the role of foreign exchange markets in international operations
3. describe measurement and implications of foreign exchange exposure and political risk
4. identify unique financial characteristics of multinational firms as opposed to domestic firms
5. produce a research project resulting from a team effort
IV. Text (Required)
Alan C. Shapiro and Atuyla Sarin, Foundations of Multinational Financial Management, 6th edition, John Wiley & Sons, Inc., 2009
V. Policies and Procedures
The student is responsible for all material covered and all information disseminated when he/she misses a class or arrives late. This includes additional assignments made during class and practice problem sets distributed in class. In addition to a comprehensive final examination, a mid-term examination will be given (see following section for dates and materials to be included). The final examination will be more heavily verbal; the mid-term will be more heavily problems. No make-up exams are given. Any student missing an exam must confer with the professor before or during (not after) the scheduled exam day to determine the consequences of the missed exam. Further, each student, working in a team, will submit a formal research paper on an approved topic (see below for approval dates) and will make an oral presentation to the class of the basic findings and conclusions of the paper. Dates for presentations will be determined on the basis of the topic chosen and its logical relationship to the material being covered in class. The final typed research paper is due November 25 and the deadline for topic approval is October 5. Starting October 26, one or two student presentations will be made each week. Presentations made early are not expected to be as complete as those made nearer the deadline for the submission of the final paper. Material covered in student presentations will be included on the final examination.
For grading purposes, the following weights will be assigned:
Mid-term examination 40%
One research paper and oral presentation 20%
Final examination 40%
and letter grades apply as follows:
90 – 100 A
80 - 89 B
70 - 79 C
60 - 69 D
0 - 59 F
NOTE: All cell phones must be turned off and out of sight during class. A student with a visible cell phone or other electronic device other than a stand-alone calculator during an exam will not be allowed to complete the exam and will receive a grade of zero for the exam. Anyone late to class 15 minutes or more (including final exam) will not be allowed to take the exam.
VI. Progression of Course
Week 1, August 24 and 26
Chapter 1 – Introduction: Multinational Enterprise and Multinational Financial Management
Questions 1, 2, 4, 5, 7, 8
Chapter 2 – The Determination of Exchange Rates
Questions 1, 2, 3, 4, 5, 7
Problems 2, 3
Week 2, August 31 and September 2
Chapter 2 - Continued
Chapter 3 - The International Monetary System
Questions 1, 3, 4, 6, 7
Problems 1, 2
Week 3, September 9 (September 7 is a holiday)
Chapter 3 -- Continued
Chapter 6 – The Foreign Exchange Market
Questions 1, 2, 3, 4, 5
Problems 1, 2, 3, 4, 5, 6, 8 (a only), 10
September 9 – Census Date
Week 4, September 14 and 16
Chapter 6 Continued
Chapter 4 -- Parity Conditions in International Finance and Currency Forecasting
Questions 1, 3, 6, 8, 10, 12, 13
Problems 2, 5, 13, 14, 15
Groups assigned September 14
Week 5, September 21 and 23
Chapter 4 -- Continued
Week 6, September 28 and 30
Chapter 5 -- The Balance of Payments and International Economic Linkages
Questions 1, 3, 9
Problems 1
Chapter 7 – Currency Futures and Options Markets
Questions 2, 3, and
a. value of an option premium equals? is determined by?
b. condition for option to be in-the-money
c. condition for option to be profitable (put AND call)
Problems 1, 2, 3, 5, 6 (a only)
Week 7, October 5 and 7
Chapter 8 -- Swaps and Interest Rate Derivatives
Questions 1, 2, 3, 4
Problems 1 (a and b only)
Chapter 9 -- Measuring and Managing Translation and Transactions Exposure
Questions 1, 2, 3, 4, 6, 9 10
Problems 1 (a and b only), 2, 4, 7, 9 (omit e), 10
Deadline for topic approval is October 5
Week 8, October 12 and 14
Chapter 9 - Continued
Midterm exam October 14
Week 9, October 19 and 21
Chapter 10 -- Measuring and Managing Economic Exposure
Questions 1, 3, 5, 6
Chapter 11 – Country Risk Analysis
Questions 1, 2, 3, 4,
Problems 3, 5
Week 10, October 26 and 28
Student presentations
Chapter 12 -- International Financing and National Capital Markets
Questions 1, 2, 4, 6, 7, 8, 10, 11, 12, 13 and
Causes for development of the offshore markets
Reasons why these markets continue to grow
Problems 2, 3
October 30 – last drop date
Week 11, November 2 and 4
Student presentations
Chapter 12 -- Continued
Chapter 13 - International Portfolio Investment
Questions 1, 2, 3, 4, 5, 6, 9
Problems 1, 2, 3, 4
Week 12, November 9 and 11
Student presentations
Chapter 13 -- Continued
Chapter 14 -- Capital Budgeting for the Multinational Corporation
Questions 1, 2, 3, 4, 7, 8 9 and
a. why APV vs NPV
a. how compute all equity rate
b. whose cash flow (why differ)
c. which cash flow
d. how include political risk
Problems 3, 4
Week 13, November 16 and 18
Student presentations
Chapter 14 – Continued
Chapter 15 -- Financing Foreign Trade
Questions 1, 2, 3, 4, 5
Problems 2, 7, 8
Week 14, November 23 and 25
Student Presentations
Chapter 16 - Managing the Multinational Financial System
Questions 1, 2, and
Transfer Pricing – definition and uses
Leading/Lagging
Fees and Royalties
Loans - back to back (fronting) and parallel
Equity vs. Debt re country risk
Problems 1 (a only)
Research papers are due November 25
Week 15, November 30 and December 2
Chapter 16 - Continued
Review for final examination
Final Examination – Monday, December 7, 5:30 – 8:00 p.m.
Syllabus Addendum
Academic Integrity:
It is the philosophy of The University of Texas at Arlington that academic dishonesty is a completely unacceptable mode of conduct and will not be tolerated in any form. All persons involved in academic dishonesty will be disciplined in accordance with University regulations and procedures. Discipline may include suspension or expulsion from the University.
“Scholastic dishonesty includes but is not limited to cheating, plagiarism, collusion, the submission for credit of any work or materials that are attributable in whole or in part to another person, taking an examination for another person, any act designed to give unfair advantage to a student or the attempt to commit such acts.” (Regents’ Rules and Regulations, Series 50101, Section 2.2)
Americans with Disabilities Act (ADA):
The University of Texas at Arlington is on record as being committed to both the spirit and letter of the federal equal opportunity legislation; reference Public Law 92-112 – The Rehabilitation Act of 1973 as amended. With the passage of federal legislation entitled Americans with Disabilities Act (ADA), pursuant to section 504 of the Rehabilitation Act, there is renewed focus on providing this population with the same opportunities enjoyed by all citizens.
As a faculty member, I am required by law to provide “reasonable accommodations” to students with disabilities, so as not to discriminate on the basis of that disability. Student responsibility primarily rests with informing faculty of their need of accommodation and in providing authorized documentation through designated administrative channels. Information regarding specific diagnostic criteria and policies for obtaining academic accommodations can be found at www.uta.edu/disability. Also, you may visit the Office for Students with Disabilities in room 102 of University Hall or call them at (817) 272-3364.
Attendance Policy:
Students are expected to attend each class and students are expected to come to each class with their assignments completed. Students who must miss a class are responsible for securing any and all assignments for coursework missed.
Drop Policy:
See University drop policy.
Grade Distributions:
The distribution of grades for the semester will normally adhere to the guidelines of the Department of Finance and Real Estate. These guidelines are generally based on College of Business Administration averages for similar courses.
Food/Drink in Classrooms:
College policy prohibits food and/or drinks in classrooms and labs. Anyone bringing food and/or drinks into a classroom or lab will be required to remove such items, as directed by the class instructor or lab instructor.
Student Support Services Available and Library Information:
The University of Texas at Arlington supports a variety of student success programs to help you connect with the University and achieve academic success. These programs include learning assistance, developmental education, advising and mentoring, admission and transition, and federally funded programs. Students requiring assistance academically, personally, or socially should contact the Office of Student Success Programs at 817-272-6107 for more information and appropriate referrals.
We have two library liaisons: Ruthie Brock is one and she can be reached at (817) 272-7152, and by email at . Carol Byrne is the other and she can be reached at (817)272-7437, and by email at . You will find useful research information for finance at http://www.uta.edu/library/research/rt-fina.html.
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