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International Financial Management

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International Financial Management

This course is designed to acquaint students with tools and techniques used to manage the finance function of a multinational corporation (MNC). Topics included in this course are: financial environment in which an MNC operates, exchange rate determination, measurement and management of various exchange rate exposure, international capital budgeting, multinational cost of capital and capital structure of an MNC.

Introduction to Finance, FIN201.

  1. It is the student’s responsibility to gather information about the assignments and covered topics during the lectures missed. Regular class attendance is mandatory. Points will be taken off for missing classes. Without 70% of attendance, sitting for final exam is NOT allowed. According to IUB system students must enter the classroom within the first 20 minutes to get the attendance submitted.
  2. The date and syllabus of quiz, midterm and final exam is already given here, however, announcements will be given ahead of time. There is NO provision for make-up quizzes.
  3. The reading materials for each class will be given prior to that class so that student may have a cursory look into the materials.
  4. Class participation is vital for better understanding of sociological issues. Students are invited to raise questions.
  5. Students should take tutorials with the instructor during the office hours. Prior appointment is required.
  6. Students must maintain the IUB code of conduct and ethical guidelines offered by the School of Business.
  7. Students must refrain from any type of cheating and/or plagiarism in a course. Any student acting otherwise will receive an “F” grade in the course. School of Business, IUB, maintains a zero tolerance policy regarding violation of academic integrity.
  1. Students are not allowed to keep bags, handouts, books, mobile phones, smart watches or any other smart electronic devices with them during any exam. Students are advised to keep everything in the front of the class room before the exam starts. Please note that, just carrying any smart electronic devises (even if the devise is turned off or put it in silent mode) during the exam will be considered as “cheating”. Moreover, during the exam, anything written on hand palms (or anywhere else) and carrying paper materials (whatever is written) will be considered as “cheating”. Any sorts of “cheating” will result in an “F” grade with no exception. During the exam, students are only allowed to carry pen, pencil, eraser, sharpener, ruler, highlighter and calculator in a clear plastic bag.
Type of Evaluation Nos. Weight
Class Attendance and Participation 100% 5
Quiz (Best two will be counted) 3 15
Project and Presentation 01 15
Midterm Exam 01 30
Final Exam 01 35
Total   100%

[Class attendance is mandatory; failure to do so may deduct the final marks]

The following chart will be followed for grading. This has customized form the guideline provided by the school of Business.

A A- B+ B B- C+ C C- D+ D F
90-100 85-89 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 0-44

* Numbers are inclusive

The course will be based mostly on the following books [some other books and journals may be referred time to time]:

  • International Financial Management by Jeff Madura, 11th Edition.

 

MORE READINGS:

  • Foundations of Multinational Financial Management by Alan C. Shapiro, Fourth Edition.
  • All other supporting materials (e.g. academic research papers) will be provided in the class.

 

Link to virtual learning system: http://103.254.86.4/sb/ (School of Business – Faculty name- Login as a guest- password is 1234).

Sessions Topic Learning Outcomes Readings
Session -1 Introduction Introduction to International Financial

Management

Explanation of Course Outline

Course

Outline

Session -2 International Financial

Management:

An Overview

To know the management goal and organizational structure of the MNC,

 

To understand the key theories that justify international business,

 

To have clear idea about the common methods used to conduct international business

 

To learn a model for valuing the MNC.

Jeff Madura,

Chapter1

 

Pages 3-28

 

Handout available on virtual learning system

Session -3 International Financial

Management:

An Overview

To know the management goal and organizational structure of the MNC,

 

To understand the key theories that justify international business,

 

To have clear idea about the common methods used to conduct international business

 

To learn a model for valuing the MNC.

Jeff Madura,

Chapter1

 

Pages 3-28

 

Handout available on virtual learning system

Session -4 International Financial To know the management goal and organizational structure of the MNC, Jeff Madura, Chapter1

 

Management: An Overview  

To understand the key theories that justify international business,

 

To have clear idea about the common methods used to conduct international business

 

To learn a model for valuing the MNC.

 

Pages 3-28

 

Handout available on virtual learning system

Session -5 Exchange Rate

Determination

 

Understand how exchange rate movements are measured,

 

Understand how the equilibrium exchange rate is determined,

 

Understand factors that affect the equilibrium exchange rate,

 

Understand the movements in cross exchange rates,

 

Understand how financial institutions attempt to capitalize on anticipated exchange rate movements.

 

Relevant Problem Solving from Text

 

Jeff Madura,

Chapter4

 

Pages 99-122

 

Handout available on virtual learning system

Session -6 Exchange Rate

Determination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Understand how exchange rate movements are measured,

 

Understand how the equilibrium exchange rate is determined,

 

Understand factors that affect the equilibrium exchange rate,

 

Understand the movements in cross exchange rates,

 

Understand how financial institutions attempt to capitalize on anticipated exchange rate movements.

 

Relevant Problem Solving from Text

 

Jeff Madura,

Chapter4

 

Pages 99-122

 

Handout available on virtual learning system

 

Quiz 1 Fundamental of International Finance
Session-7 Exchange Rate

Determination

Understand how exchange rate movements are measured,

 

Understand how the equilibrium exchange rate is determined,

 

Understand factors that affect the equilibrium exchange rate,

 

Understand the movements in cross exchange rates,

 

Understand how financial institutions attempt to capitalize on anticipated exchange rate movements.

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter4

 

Pages 99-122

 

Handout available on virtual learning system

Session -8 Exchange Rate

Determination

Understand how exchange rate movements are measured,

 

Understand how the equilibrium exchange rate is determined,

 

Understand factors that affect the equilibrium exchange rate,

 

Understand the movements in cross exchange rates,

 

Understand how financial institutions attempt to capitalize on anticipated exchange rate movements.

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter4

 

Pages 99-122

 

Handout available on virtual learning system

Session -9 Currency

Derivatives

 

 

 

 

 

 

 

 

Understand how forward contracts are used to hedge based on anticipated

exchange rate movements

 

To have in depth knowledge about how currency futures contracts are used to speculate or hedge based on

anticipated exchange rate movements

 

To have in depth knowledge about

Jeff Madura,

Chapter 5

 

Pages 123-

172

 

Handout available on virtual learning

 

 

 

 

 

 

 

Quiz 2

how currency options contracts are used to speculate or hedge based on anticipated exchange rate movements.

 

Relevant Problem Solving from Text

 

Concepts of Exchange rate determination

system
Session -10 Currency

Derivatives

Understand how forward contracts are used to hedge based on anticipated

exchange rate movements

 

To have in depth knowledge about how currency futures contracts are used to speculate or hedge based on

anticipated exchange rate movements

 

To have in depth knowledge about how currency options contracts are used to speculate or hedge based on anticipated exchange rate movements.

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter 5

 

Pages 123-

172

 

Handout available on virtual learning system

Session -11 International

Arbitrage and

Interest Rate

Parity

 

 

 

 

 

 

 

 

 

Project

To understand the conditions that will result in various forms of international arbitrage and the realignments that will occur in response,

 

To have clear idea about the concept of interest rate parity

 

Understand the variation in forward rate premiums across maturities and over time.

 

Relevant Problem Solving from Text

International Financial Operations in MNCs in Bangladesh

Jeff Madura,

Chapter 7

 

Pages 211-

240

 

Handout available on virtual learning system

Session -12 International

Arbitrage and

Interest Rate

Parity

 

 

 

To understand the conditions that will result in various forms of international arbitrage and the realignments that will occur in response,

 

To have clear idea about the concept of interest rate parity

Jeff Madura,

Chapter 7

 

Pages 211-

240

 

Handout

 

 

 

 

 

 

 

Understand the variation in forward rate premiums across maturities and over time.

 

Relevant Problem Solving from Text

available on virtual learning system
Session -13 International

Arbitrage and

Interest Rate

Parity

To understand the conditions that will result in various forms of international arbitrage and the realignments that will occur in response,

 

To have clear idea about the concept of interest rate parity

 

Understand the variation in forward rate premiums across maturities and over time.

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter 7

 

Pages 211-

240

 

Handout available on virtual learning system

Session -14 Midterm Exam  CHAPTERS 1, 4 , 5 & 7
Session -15 Relationships among Inflation,

Interest

Rates,         and

Exchange

Rates

To have clear understanding about the purchasing power parity (PPP) theory and its implications for exchange rate changes,

 

To understand the international Fisher effect (IFE) theory and its implications

for exchange rate changes

 

To learn to compare the PPP theory, the IFE theory, and the theory of interest rate parity (IRP), which was introduced in the previous chapter

 

Relevant Problem Solving from Text

 

Jeff Madura,

Chapter 8

 

Pages 241-

280

 

Handout available on virtual learning system

Session -16 Relationships among Inflation, Interest Rates, and Exchange

Rates

To have clear understanding about the purchasing power parity (PPP) theory and its implications for exchange rate changes,

 

To understand the international Fisher effect (IFE) theory and its implications

for exchange rate changes

Jeff Madura,

Chapter 8

 

Pages 241-

280

 

Handout available on

 

 

To learn to compare the PPP theory, the IFE theory, and the theory of interest rate parity (IRP), which was introduced in the previous chapter

 

Relevant Problem Solving from Text

 

Relevant Problem Solving from Text

 

virtual learning system
Session -17 Relationships among Inflation, Interest Rates, and Exchange

Rates

To have clear understanding about the purchasing power parity (PPP) theory and its implications for exchange rate changes,

 

To understand the international Fisher effect (IFE) theory and its implications

for exchange rate changes

 

To learn to compare the PPP theory, the IFE theory, and the theory of interest rate parity (IRP), which was introduced in the previous chapter

 

Relevant Problem Solving from Text

 

Jeff Madura,

Chapter 8

 

Pages 241-

280

 

Handout available on virtual learning system

Session -18 Forecasting

Exchange Rates

To understand  how firms can benefit from forecastingexchange rates

 

To have clear concept regarding the common techniques used for

forecasting

 

To acquire skills about how forecasting performance can be evaluated

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter 9

 

Pages 283-

310

 

Handout available on virtual learning system

Session -19 Forecasting

Exchange Rates

To understand  how firms can benefit from forecastingexchange rates

 

To have clear concept regarding the common techniques used for

forecasting

 

To acquire skills about how

Jeff Madura,

Chapter 9

 

Pages 283-

310

 

Handout available on

 

forecasting performance can be evaluated

 

Relevant Problem Solving from Text

virtual learning system
Session -20 Forecasting

Exchange Rates

To understand  how firms can benefit from forecastingexchange rates

 

To have clear concept regarding the common techniques used for

forecasting

 

To acquire skills about how forecasting performance can be evaluated

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter 9

 

Pages 283-

310

 

Handout available on virtual learning system

Session -21 Multinational

Capital

Budgeting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quiz 3

To understand how to compare the capital budgeting analysis of an MNC’s subsidiary versus its parent

 

To have clear idea about how multinational capital budgeting can be applied to determine whether an

international project should be

implemented

 

To understand how multinational capital budgeting

can be adapted to account for special

situations such as alternative exchange rate scenarios or when

subsidiary financing is considered

 

To know how the risk of international projects can be assessed

Relevant Problem Solving from Text

 

Forecasting Techniques

 

 

Jeff Madura,

Chapter 14

 

Pages 421-

456

 

Handout available on virtual learning system

Session -22 Multinational

Capital

Budgeting

To understand how to compare the capital budgeting analysis of an MNC’s subsidiary versus its parent

 

To have clear idea about how multinational capital budgeting can be

Jeff Madura,

Chapter 14

 

Pages 421-

456

 

 

applied to determine whether an

international project should be

implemented

 

To understand how multinational capital budgeting

can be adapted to account for special

situations such as alternative exchange rate scenarios or when

subsidiary financing is considered

 

To know how the risk of international projects can be assessed

 

Relevant Problem Solving from Text

Handout available on virtual learning system
Session -23 Multinational Cost of Capital and Capital Structure To understand the key components of an MNC’s capital

 

To know the factors that affect an MNC’s capital structure

 

To know about the interaction between a subsidiary and parent in

capital structure decisions

 

To understand how the cost of capital is estimated

 

To have clear idea about why the cost of capital varies among countries.

 

Relevant Problem Solving from Text

Jeff Madura,

Chapter 17

 

Pages 507-

530

 

Handout available on virtual learning system

Session -24 Multinational Cost of Capital and Capital Structure To understand the key components of an MNC’s capital

 

To know the factors that affect an MNC’s capital structure

 

To know about the interaction between a subsidiary and parent in

capital structure decisions

 

To understand how the cost of capital is estimated

 

To have clear idea about why the cost

Jeff Madura,

Chapter 17

 

Pages 507-

530

 

Handout available on virtual learning system

Students who are willing to audit the course are welcome during the first two classes and are advised to contact the instructor after that.

Plagiarism- that is the presentation of another person’s thoughts or words as though they were the students’ own – must be strictly avoided. Cheating and plagiarism on exam and assignment are unacceptable.

Please see the green book for further information about academic regulation and policies, including withdrawal and grading, apples and penalties for pilgrims and academic misconduct.

Students with disabilities are required to inform the School of Business/ Department of Economics of any specific requirement for classes or examination as soon as possible.