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Lovely Professional University,Punjab

Format For Instruction Plan [for Courses with Lectures and Tutorials ]

Course No. MGT645 Course Title: INTERNATIONAL FINANCIAL MANAGEMENT L: 3 T: 1 P: 0 Cr: 4

Course Planner :- 14274 :: Richa Singh

TextBook

1. Eun/Resnick, International Financial Management, Tata McGrawHill, 4th Edition

Other Specific Books


2. Shapiro Allan C, Multinational Financial Management, John Willy & Sons, 8th Edition
3. Bhalla, V.K. International Financial Management, 6th Edition, Anmol Publication
4. Eitman K. David, Multinational Business Finance, Pearson Education, 4th Edition
5. P.G. Apte ,International financial Management, 5th Edition ,Tata Mc Graw Hill
6. Jeff Madura, International Financial Management. Cengage Learning.

Other Readings

Sr. No. Jouranls atricles as compulsary readings (specific articles, Complete reference)

7 Swaps Introduction "http://www.cit.com/wcmprod/groups/content/@wcm/@cit/@products-and-services/documents/information/ir-swap-body.pdf"

8 Recession and India's balance of payments "http://www.thehindubusinessline.com/2010/01/26/stories/2010012650130900.htm"

9 India: Towards interest rate reforms in China


"http://proquest.umi.com/pqdweb?index=27&did=59416640&SrchMode=1&sid=5&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=12790963
34&clientId=129893"
10 FDI and the balance of payments: "http://www.thehindubusinessline.com/2010/03/09/stories/2010030950860900.htm"

11 Currency options: "http://www.iimcal.ac.in/community/finclub/dhan/dhan7/CURRENCY%20OPTIONS.pdf"

12 The Indian Foreign Exchange Market and the equilibrium real exchange rate of rupee "http://openlib.org/home/ila/PDFDOCS/PatnaikPauly2001_indianforex.pdf"

13 IMF Reform "http://www.g24.org/Trum0905.pdf"

Relevant Websites

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Sr. No. Web adress (only if relevant to the courses) Salient Features

14 www.moodys.com , www.standardandpoors.com The web site contains country risk ratings and analyses.

15 www.bis.org/cbanks.htm Web site of the bank for international settlements, which takes you directly
to links with the various central banks of the world.
16 www.oecd.org/std/nadata/htm Contains data on PPP exchange rates for the OECD countries going back
to 1970. The PPP exchange rate data is presented in spread sheet that can
be saved.
17 www.economist.com The Economist contains stories on economic and political situations of
countries, along with various national and international economic and
financial data.

Detailed Plan For Lectures


Pedagogical tool
Chapters/Sections of
Homework to be Demonstration/case
Week No. Lecture No. Topic Textbook/other
Assigned to students study/images/anmation
reference
ctc. planned

Part 1
Week 1 Lecture 1 Financial Management In Global Context : Introduction, Emerging Book :6,ch-1
Challenges, Responsibilities Of Finance Managers.
Lecture 2 Goals For International Financial Management, Globalisation Of World Book :1,Ch-1 Mini Case: Nike's
Economy : Recent Trends Decision & Case : General
electric globalises
Lecture 3 Evolution Of International Monetary system In brief -Bimetallism, Book :1,Ch-2
Classical Gold Standard, Interwar Period, Bretton Woods System,
Flexible Exchange Rate Regime

Week 2 Lecture 4 Current Exchange Rate Arrangement, Role Of IMF Book :1,Ch-2 HomeWork 1 Allocation Case : Blades Inc.
(running case)/
Pg.99-100/ Ref.6
Lecture 5 Introduction : Euro Monetary System, Benefits & Costs Of EMU, Book :1,Ch-2 Mini case : Will The
ADRs & GDRs, SDRs. United Kingdom Join The
Euro Club
Lecture 6 Balance Of Payment Accounting, BOP Accounts ( Current Account, Book :1,Ch-3 (Text Book) Articles : Ref.10 & Case :
Capital Account, Statistical Discrepancy, Official Reserve Account) Ch-5(Ref-2) The Bank of Korea
reassesses its Reserve
(Ref-2, Ch-5)

Week 3 Lecture 7 Global Financial Markets: Domestic & Offshore Markets, Euro Markets Book :1,Ch-5 (text Book) Ch-6 Ref- 10 & 8
and its evolution ( Ref-3)

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Part 1
Week 3 Lecture 8 Economic impact of Euro and other Offshore markets, Interest Rates Book :5,Ch-6 ( Ref-3) Term Paper 1 Allocation Case: Blades Inc (Pg.78,
In Global Financial Markets Ref.6)

Lecture 9 Spot Rate Quotations: Direct and Indirect quotations, Bid-Ask Spread, Book :1,Ch-5
Spot Foreign Exchange Market, Forward Foreign Exchange Market.

Week 4 Lecture 10 Exchange Rates, Cross Exchange Rates Quotations, Triangular Book :1,Ch-5 HomeWork 1
Arbitrage Submission
Part 2
Week 4 Lecture 11 Forward Cross Exchange Rates, Forward Point quotations. Book :1,Ch-5 Mini Case: Turkish Lira
and Purchasing Power
Parity (Ref-1, Pg. 159)
Lecture 12 Determination of Exchange Rates: Setting the equilibrium spot Rate, Book :2,Ch-2 Case: Blades Inc (Pg.99,
Expectations and asset pricing model of exchange rates Ref.6)

Week 5 Lecture 13 Determination of Exchange Rates: Fundamentals of Central Bank Book :2,Ch-2 HomeWork 2 Allocation Mini Case: Shrewsbury
Intervention, The Equilibrium Approach to exchange rates. Herbal Products Ltd.
(ref-1)
Lecture 14 Interest Rate Parity: Parity conditions, Covered Interest Rate Arbitrage Book :1,Ch-6 Case: Blades Inc (Pg.194)

Lecture 15 Interest Rate Parity: Uncovered Interest Rate Arbitrage, Reasons for Book :1,Ch-6
Deviation from Interest Rate Parity.

Week 6 Lecture 16 Parity Conditions in International Finance: Law of one Price, Book :1,Ch-6 Ref-12
Purchasing Power Parity, PPP and the Real exchange Rate
Lecture 17 Parity Conditions in International Finance: Fisher's Effect, Book :1,Ch-6
International Fisher Effect, Forecasting exchage rates
Lecture 18 Country Risk and Political, Social and Economic Risks Book :3,Ch-31(Ref-3) HomeWork 2
Ch-6(Ref-2) Submission

Week 7 Lecture 19 Need for Risk Evaluation, Political Risk Analysis, Managing Political Book :3,Ch-31(Ref-3) Quiz 1
Risk Ch-6(Ref-2)
Lecture 20 Introduction to foreign exchange risk Exposure: Meaning of Book :1,Ch-8 9 10
Transaction, Translation, Operating and Economic Exposure. (Only
introduction to the concept)
Lecture 21 Revision of Syllabus before MTE

MID-TERM
Part 3
Week 8 Lecture 22 Futures on foreign exchange: Future contract some preliminaries, basic Book :1,Ch-7
currency future relationship, Eurodollar interest rate future contracts.

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Part 3
Week 8 Lecture 23 Futures on foreign exchange: Future Prices, Expected spot prices, and Book :1,Ch-7 (Ref1) Ch-8 HomeWork 3 Allocation Case: Blades Inc (Pg.126
forward prices, Hedging and speculation with currency futures. (Ref-2) Ref.6)

Lecture 24 Options on foreign Exchange: Meaning, How options work Book :1,Ch-7 Ref-11

Week 9 Lecture 25 Options on foreign Exchange: Options on spot, options on futures, Book :5,Ch-10
and future style options, price quotations,
Lecture 26 Options on foreign Exchange: Elementary option strategies. Book :6,Ch-5

Lecture 27 Options on foreign Exchange: Hedging with currency options, Option Book :1,Ch-7(Ref-1)
Pricing (Binominal Model) Ch-8(Re-2)

Week 10 Lecture 28 Interest Rate Derivatives: Interest Rate Futures, Short term & Long Book :5,Ch-9 HomeWork 3
Term Interest Rate Futures Submission

Lecture 29 Interest Rate Derivatives: Forward forwards, Forward Rate Agreement, Book :2,Ch-9 HomeWork 4 Allocation
Eurodollar Futures
Part 4
Week 10 Lecture 30 Swaps: Types of swaps, swap bank, Swap market quotations, LIBOR, Book :1,Ch-14
QSD

Week 11 Lecture 31 Interest Rate Swaps: Basic Interest Rate Swap, Fixed for floating Book :1,Ch-14 Swaps: Ref-7
interest rate swap, Picing the basic Interest rate swap.
Lecture 32 Currency Swaps: Basic Currency Swap, Variation of Basic Currency Book :1,Ch-14 Mini Case: The Centralia
and Interest Rate Swap, Risk of Interest Rate and Currency Swaps Corporations Currency
Swap (Ref-1, Pg. 355)
Lecture 33 Economic Exposure, Determinants of economic exposure, Managing Book :1,Ch-9 Term Paper 1
the economic exposure Submission

Week 12 Lecture 34 Management of Transaction Exposure: Meaning of Transaction Book :1,Ch-8 HomeWork 4
Exposure, Forward market Hedge, Money Market Hedge Submission

Lecture 35 Management of Transaction Exposure: Option Market Hedge, Cross Book :1,Ch-8 Case Study: Chase
Hedging Minor Currency Exposure, Hedging Contingent Exposure. Options, Inc.: Hedging
foreign currency
exposure through
currency options.(ref-1,
Pg. 215)
Lecture 36 Management of Transaction Exposure: Hedging Recurrent Exposure Book :1,Ch-8 (Ref-1)
with Swap Contracts, Hedging through Invoice Currency, Lead/Lag Ch-10(Ref-2)
strategy, Exposure netting.

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Part 4
Week 13 Lecture 37 Management of Translation Exposure: Current/Non current method, Book :1,Ch-10 Quiz 2 Case Study:
Monetary/non-monetary method, Temporal method, current rate Metallgesellschaft's
method Hedging Debacle

Lecture 38 Management of Translation Exposure: Translation exposure vs Book :1,Ch-10


transaction exposure, Balance Sheet Hedge
Lecture 39 Revision of syllabus covered before MTE.

Spill Over
Week 14 Lecture 40 Financial structure and international debt Book :4,Ch-13

Lecture 41 Multinational Cash Management Book :1,Ch-19

Lecture 42 International Capital Budgeting Book :1,Ch-18

Details of homework and case studies plan


Nature of homework
Homework No. Topic of the Homework (group/individuals/field work

Homework 2 Numerical/Practical problems on Interest Rate Parity, Exchange Rate Determination, PPP, Test will Individual
be taken based on this assignment.

Homework 1 A group of 2 students will be asked to visit the website of company assigned by the Group
instructor.Eamine its international business activities like:What importance does it plce on
international business ?Is its foreign activities increasing over time?What % of its sales & income
comes from exports,etc

Homework 3 Numerical/Practical problems on FOREX, Futures, Options Test will be taken based on this Individual
assignment.

Homework 4 Numerical/Practical problems on, Swaps, Transaction Exposure, Operating Exposure. Test will be Individual
taken based on this assignment.
*Normally all the homeworks shall be submitted online but in special courses where homeworks cannot be submited online , the insructor can edit the mode of submission while
entering the IP Details

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Scheme for CA:out of 100*
Component Frequency Out of (If any) Marks for each Total Marks

Quiz 2 15 30

Term Paper 1 25 25

Homework 3 4 15 45

Total :- 100

* In ENG courses wherever the total exceeds 100, consider x best out of y components of CA, as explained in teacher's guide available on the UMS

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List of suggested topics for term paper[at least 15] (Student to spend about 15 hrs on any one specified term paper)
Sr. No. Topic
1 Using data from OECD(www.oecd.org/nadata.htm), plot the PPP exchange rates for the U.S. dollar, Indian
Rupee Have these PPP exchange rates have gone up or down over time? What accounts for the changes in
these PPP exchange rates over time?
2 Using data from OECD(www.oecd.org/nadata.htm), plot the PPP exchange rates for the Mexican Peso, Korean
Won. Have these PPP exchange rates have gone up or down over time? What accounts for the changes in
these PPP exchange rates over time?
3 Review the annual reports of three MNC's found at (www.reportgallery.com) and analyze which currencies
have these companies borrowed in, besides the U.S. dollar? Do these foreign currency borrowings offset any
obvious economic exposure they have in those currencies? (foreign)
4 Review the annual reports of Pepsi found at (www.reportgallery.com) . Is it obvious from their annual reports
whether this company is hedging its, Economic, Transaction or Translation Exposure?
5 Review the annual reports of Coca Cola MNC at (www.reportgallery.com) and analyze which currencies have
this company borrowed in besides the U.S. dollar? Do these foreign currency borrowings offset any obvious
economic exposure it has in those currencies?
6 Using data from OECD(www.oecd.org/nadata.htm), plot the PPP exchange rates for the pound, yen. Have
these PPP exchange rates have gone up or down over time? What accounts for the changes in these PPP
exchange rates over time?
7 Using data from OECD(www.oecd.org/nadata.htm), compare the most recent PPP exchange rates for the
pound, yen and euro with their nominal exchange rates. What difference do you observe? What accounts for
these differences?
8 Review the annual reports of three MNC's found at (www.reportgallery.com). Is it obvious from their annual
reports whether these companies are hedging their, Economic, Transaction or Translation Exposure?
9 Based on historical data from BEA (www.bea.doc.gov), what is the relationship US trade balances and the
value of the US dollar.
10 Many Asian governments have attempted to promote their export competitiveness by holding down the value
of their currencies through foreign exchange market intervention.
11 Dell produces its machines in Asia with parts imported from US & sells its products in Asia in local
currencies.Explain the impact on Dell's Asian gains of a strengthened dollar & the hedging tech. that Dell can
use to lock in a desired currency conversion rate for its Asian sales next year
12 Analyze the BoP of India for 5-8 years.Examine the trade balance, current account balance, basic balance &
overall balance;What accounts for swings in these balances over time; What's the relation between shifts in
the current-account balance and changes in saving and investment.
13 Analyze the BoP of a given nation for 5-8 years.Examine the trade balance, current account balance, basic
balance & overall balance.What accounts for swings in these balances over time?What's the relation between
shifts in the current account balance & changes in saving & investment?
14 Pick out a country (e.g. Argentina, China, India). What is the general assessment of your pick's country risk?
The analysis of the country risk should be done on the following parameters a) Economic risk b) Political risk
c) Socio-Cultural Risks (Source:www.moodys.com ; www.standardandpoors.com)

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15 Lenovo produces its Machines in Asia with parts imported from US & sells its products in Asia in local
currencies.What's the impact on Lenovo's Asian profits of a weakened dollar.what hedging tech. can it use to
lock in a desired currency conversion rate for its Asian sales during the next year?

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Plan for Tutorial: (Please do not use these time slots for syllabus coverage)

Tutorial No. Topic Type of pedagogical tool(s) planned


(case analysis,problem solving test,role play,business game etc)

Tutorial 1 IMF & its evolution, EMU & its evolution Case analysis

Tutorial 2 Balance of Payments Case analysis

Tutorial 3 Interest Rate Parity Problem solving

Tutorial 4 Determination of Exchange Rates Problem solving

Tutorial 5 Purchasing Power Parity Problem solving

Tutorial 6 Term Paper Review 1

Tutorial 7 Country Risk Analysis

After Mid-Term
Tutorial 8 Futures on FOREX Problem solving

Tutorial 9 Options on FOREX Problem solving

Tutorial 10 Term Paper Review 2

Tutorial 11 Swaps on FOREX Case analysis

Tutorial 12 Management of Transaction & Operating Exposure Case analysis

Tutorial 13 Doubt-clearing session

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