1

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA

Topics

Student Learning Outcomes (Expected

Course Competencies)

I. Course Orientation (1.5 hours)

A. USC Vision and Mission Statement
B. SBE and Department of Accountancy Aims
C. Duties and responsibilities of a student
D. Classroom rules and policies
E. Expectations from the subject and the teacher
F. Course Overview

CO2
1.

II. Financial Markets (1.5 hours) - Saunders

A. Types of financial markets
B. Types of financial institutions and their services
C. Types of risks financial institutions encounter
D. Importance of regulation of financial institutions
E. Importance of financial institutions in the financial
market
F. Globalization of financial markets and institutions

CO1, CO2, CO3, and CO5

1. Differentiate between primary and secondary markets.
2. Differentiate between money and capital markets.
3. Know the different types of financial institutions and
their services.
4. Identify risks that financial institutions face
5. Understand the regulatory aspects imposed on financial
institutions.
6. Understand why financial markets are increasingly
becoming global.
7. Classify specific transactions as taking place in the
primary or secondary markets.
8. Classify specific financial instruments as money market
securities or capital securities.
9. Distinguish the locations of the money market and the
capital market.
10. Enumerate major instruments traded in capital market.
11. To explore the likely economic scenarios transacted
between suppliers of funds (e.g. households) and users
of funds if the world is without financial institutions.
12. To rationalize the widely-practiced adoption of indirect
transfer of funds from suppliers of funds to users of
funds rather than the direct transfer of funds.
13. Understand the meaning of maturity intermediaries and
denomination intermediaries.
14. Identify services that financial institutions provide to the
financial system.
15. Know the reason for the need for denomination
intermediation.
16. Identify the two major sectors that society has identified
as deserving special attention in credit allocation.
Aware of the trends in the growth of global financial
markets since the 1980s.

III. The Role of Financial Markets and Financial

Intermediaries (1.5 hours) - Mayo
A. The Role of Money
B. The Role of Interest Rates
C. Financial Markets and the Transfer Through Financial
Intermediaries
D. Commercial Banks and Thrift Institutions
E. Regulation of Commercial Banks and Thrift Institutions
F. Life Insurance Companies
G. Pension Plans

CO1, CO2, CO3, and CO5

1. Define money and determine how the money supply is
measured.
2. Develop a yield curve and contrast positive and negative
yield curves.
3. Differentiate the direct and indirect transfer of savings to
users of funds.
4. Enumerate the primary assets and liabilities of a
commercial bank.
5. Describe several regulations that apply to the banking
system.
6. Differentiate required and excess banks reserves.
7. Explain the role of FDIC (PDIC).
8. Compare the assets of life insurance companies and
commercial banks.
9. Contrast the various money market instruments.
CO1, CO2, CO3, and CO5

IV. Investment Banking (1.5 hours) MAYO

A. The Transfer of Funds to Business

Review of the related concepts, principles, formulas, and

other matters relating to the course

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA
B.
C.
D.
E.
F.
G.

The Role of Investment Bankers

Volatility of the Market for Initial Public Offerings
Shelf Registrations
The Regulation of New Public Issues of
Corporate Securities
Sarbanes-Oxley Act of 2002

1.
2.
3.
4.
5.
6.

V. Securities Markets (1.5 hours) MAYO

A. Market Makers
B. Composite Transactions
C. The Mechanics of Investing in Securities
D. Measures of Securities Prices
E. Foreign Securities
F. Competition in the Securities Markets

VI. International Currency Flows (1.5 hours) MAYO

A. Foreign Currencies and the Rate of Exchange
B. Effect on Banks Reserves and the Domestic Money
Supply
C. Balance of Payments
D. The Role of International Monetary Fund

VII. Determinants of Interest Rates (3 hours) Saunders

A. Time Value of Money and Interest Rate
B. Loanable Funds Theory
C. Movement of Interest over Time

VIII. Interest Rates and Security Valuation (4.5 hours)

Saunders
A. Interest Rate Measures
B. Bond Valuation
C. Equity Valuation
D. Impact of Interest Rate changes, maturity and
coupon rates on security values

1.

Explain the role of investment bankers.

Describe the components of a public sale of securities.
Differentiate a best-effort agreement from a firm
commitment.
Explain the purpose of a shelf registration and a private
placement.
Identify the regulatory body that enforces the
government securities laws.
State the primary purpose of government securities laws.

Distnguish between (a) organized exchanges and OTC

markets, (b) brokers and securities dealers, (c) market
orders and limit orders.
2. Trace the mechanics of a stock purchase or sale.
3. Explain the advantages and risk associated with buying
stock on margins.
4. Contrast long and short positions in stocks.
5. Illustrate the mechanics of a short sale.
6. List several aggregate measures of the stock market.
7. Determine how the trading in foreign securities are
regulated.
8. Explain why an investor should not expect to outperform
the market on a consistent basis.
CO1, CO2, CO3, and CO5
1. Express the value of a currency in terms of another
currency.
2. Explain why the demand for one currency implies the
supplying of another currency.
3. Differentiate devaluations and revaluations and their
impact on the demand for foreign goods and services.
4. Illustrate how international currency flows may affect a
nations supply of money and credit.
5. Describe the components of a nations balance of
payments.
6. Differentiate deficits and surpluses in the merchandise
trade balance.
CO1, CO2 and CO4
1. Understand the role of interest rates in determining
present and future values.
2. Differentiate between simple interest and compounded
interest.
3. Know what happens to the future value of an annuity
stream of cash flows as interest rates increases.
4. Differentiate between an effective annual rate and a
simple rate of return
5. Identify the main suppliers of loanable funds.
6. Identify the major demanders of loanable funds
7. Analyze the movement of the equilibrium interest rate
when the supply of loanable funds increases.
8. Understand how supply and demand together,
determine interest rates.
9. Review the determination of equilibrium interest rates.
10. Review the factors that cause the supply and demand
curves for loanable funds to shift.
11. Understand why market forces will react to the
resulting disequilibrium with a change in the
equilibrium interest rate and quantity of funds traded in
the market.
CO1, CO2 and CO4
1.
Apply time value of money principles to the
valuation of specific financial securities
2.
Differentiate among the expected rate of return, the
required rate of return and the realized rate of return.
3.
Understand the difference between the coupon rate
on a bond and the realized rate of return on a bond.

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA
E. Duration

IX. Movements, Structure and Forecasting of Interest Rates

(3 hours) Saunders
A. Concept on Inflation and Real Interest Rates
B. Term structure of Interest Rates
C. Various interest rate measures
D. Theories on determination of the term structure of
interest rates
E. Impact of Interest Rate changes on Security
Values

4.
Understand the role of efficient markets in
influencing required and expected rates of return.
5.
Review basic concepts about bonds, their features
and their valuation.
6.
Differentiate a zero-coupon bond and a coupon
bond.
7.
Differentiate a discount bond, a premium bond, and
a par bond.
8.
Define coupon rate on a bond.
9.
Define and calculate yield to maturity on a bond.
10. Understand how the difference between the yield to
maturity on a bond and the coupon rate on the
bond will cause the bond to sell at a premium or a
discount.
11. Understand how stock valuation differs from bond
valuation.
12. Know the difference between constant growth in
dividends and supernormal growth in dividends.
12. Know the effect on the fair present value of a bond
when the required rate of return on the bond increases.
13. Know the effect on the fair present value of a bond
when the required rate of return on the bond decreases.
14. Analyze the impact of interest rate changes on
security values or prices and present value changes on
financial securities.
15. Know the factors that affect financial security
prices.
16. Understand the relationship between interest rates
and security values.
17. Define price sensitivity.
18. Analyze the relationship between maturity and
security prices.
19. Analyze the relationships between maturity and
security price sensitivity to changes in interest rates.
20. Understand what happens to a bonds price as it
approaches maturity.
21. Understand what happens to a bonds price
sensitivity for a given change in interest rates as its time
to maturity increases/decreases.
22. Define Duration.
23. Define elasticity.
24. Illustrate a duration situation that incorporates the
time of arrival of all cash flows on an asset or liability
along with the asset or liabilitys maturity date.
25. Know the general formula for duration.
26. Know the economic meaning of Duration.
27. Understand what the denominator of the duration
equation measures.
28. Understand what the duration of a zero-coupon
bond is.
29. Understand the relationship between the duration of
a bond and its interest elasticity.
30. Define convexity.

CO1, CO2, and CO4

1. Differentiate between inflation and real interest rates.
2. Understand what happens to a securitys equilibrium
interest rate as the securitys liquidity risk increases.
3. Comprehend the meaning of term structure of interest
rates.
4. Understand how factors (like the inflation, real interest
rate, default risk, liquidity risk, special provisions and
time to maturity) affect nominal interest rates.
5. Know the calculations of real interest rates and nominal

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA
interest rates.
6. Identify the three theories that explain the determination
of the shape of the term structure of interest rates.
7. Comprehend the three explanations for the shape of
the yield curve.
8. Compare the three explanations for the shape of the
yield curve.
9. Analyze the logical foundation of the Unbiased
Expectations Theory.
10. Analyze the logical foundation of the Liquidity Premium
Theory.
11. Analyze the logical foundation of the Market
Segmentation Theory.
12. Apply these theories in calculations of interest rates.
13. Review the time value of money regarding the changes
in interest rates and the corresponding changes in the
value of financial securities.
14. Advocate the crucial need to forecast interest rates vis-vis the profitability of financial institutions and
individual investors alike.
15. Study the means to forecast interest rates.
16. Know the meaning and influence of a forward rate.
17. Know how an implied forward rate can be obtained from
current short and long-term interest rate.

MIDTERM EXAM

MIDTERM EXAM

X. Central Banking System, Monetary Policy and

Interest Rates (4.5 hours) - research
A. Duties and Responsibilities of Central Bank
B. History, Structure and Organization of Central Banking
System
C. Monetary Policy Tools and its effect to the economy
and financial market
D. Theory on Money supply and interest rates
E. International monetary policies and strategies

CO1, CO2, CO3, and CO5

1. Familiarize with the duties, responsibilities of the central
bank
2. Know the structure and organization of the central bank
3. Know the monetary policy tools used by central bank
4. Understand the effect of monetary policy tools on
various economic variables and financial market
5. Know the monetary policy strategies employed by
central bank
6. Oriented with local central bank (BSP) , Federal
Reserve System and other central banks
CO1, CO2, CO3, and CO5
1. Identify the features of common stock.
2. Explain why cumulative voting may give minority
stockholders representation on a firms board of
directors.
3. Contrast the impact of retaining earnings versus paying
cash dividends on a corporations balance sheet.
4. Explain why brokerage commissions and capital gains
taxation may affect an investors preference for the
distribution or the retention of earnings.
5. Identify the important dates for the distribution of a cash
dividend.
6. Compare the impact of a cash dividend, stock dividend,
and stock split on a firms balance sheet.
7. List the advantages associated with dividend
reinvestment plans and stock repurchases.
CO1, CO2, CO3, and CO5
1. Identify the kgeneral characteristics of bonds.
2. Explain the roles of the trustee and credit ratings.
3. Differentiate the types of corporate bonds.
4. Contrast the means for retiring bonds.
5. Differentiate the types of government debt.

XI. The Features of Stock (1.5 hours) MAYO

A. Equity
B. Common Stock
C. Dividend Policy
D. Cash Dividends
E. Stock Dividends
F. Stock Splits
G. Dividend Reinvestment Plans
H. Repurchase of Stock

XII. The Features of Long-Term Debt Bonds (1.5 hours)

MAYO

XIII. Preferred Stock (1.5 hours) MAYO

A. Features of Preferred Stock

CO1, CO2, CO3, and CO5

1. List the features of preferred stock.

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA
B.
C.
D.
E.

Preferred Stock and Bonds Contrasted

Valuation (Pricing) of Preferred Stock
Analysis of Preferred Stock
Disadvantages of Preferred Stock from an Investors
Perspective

XIV. Convertible Securities (1.5 hours) MAYO

A. Features of Convertible Bonds
B. The Valuation of Convertible Bonds
C. Premiums Paid for Convertible Debt
D. Convertible Preferred Stock
E. Calling Convertible and Investment Returns

XV. Investment Returns (1.5 hours) MAYO

A. The Computation of Returns
B. Historical Investment Returns

XVI. Investment Companies (1.5 hours) MAYO

A. Investment Companies: Origins and Terminology
B. Close-End Investment Companies
C. Mutual Funds
D. The Portfolios of Mutual Funds
E. Selecting a Mutual Fund

XVII. Foreign Exchange Market (3 hours) Saunders

A. Definition of foreign exchange terminologies
B. History of foreign exchange market
C. Importance of foreign exchange transactions in
trade and economy
D. Return and risk in foreign exchange transactions
E. Role of financial institutions in foreign exchange
transactions
F. Understanding interaction of interest rates, inflation
and exchanges rates

2.
3.

Contrast preferred stock and bonds.

Calculate earnings per share, earnings per preferred
share, and times-preferred-dividend-earned.
4. Determine the value of a preferred stock.
5. Isolate the relationship between changes in interest rates
and the price of a preferred sotck.
CO1, CO2, CO3, and CO5
1. Enumerate the features of convertible securities.
2. Calculate the value of a convertible security as stock.
3. Calculate the value of a convertible security as debt.
4. Describe the premiums paid for a convertible bond.
5. Explain why a convertible security is always callable and
when a company may all the security.
6. Determine what affects the return on an investment in a
convertible.
CO1, CO2, CO3, and CO5
1. Compute rates of return.
2. Differentiate the holding period and the annualized rate
of return.
3. Compare aggregate returns on different classes of assets.
4. Distinguish between an investors return and historical
returns.
CO1, CO2, CO3, and CO5
1. Differentiate closed-end and open-ed investment
companies.
2. Determine a funds net asset value.
3. Contrast a closed-end investment companys discount or
premium.
4. Enumerate the sources of return from an investment
company.
5. List several costs associated with inesting in a mutual
fund.
6. Differentiate mutual funds based on their portfolios.
7. Explain why mutual fund returns over time tend to track
the market as a whole.
8. Identify several considerations when selecting an
investment company for possible inclusion in your
portfolio.
9. Identify the features that differentiate exchange-traded
funds and other investment companies.
CO1, CO2, CO3, CO4, and CO5
1. Define foreign exchange market, foreign exchange
rate, and foreign exchange risk.
2. Describe the background and history of foreign
exchange markets.
3. Explain currency depreciation and appreciation.
4. Define and describe the Euro.
5. Analyze foreign exchange rates and transactions.
6. Differentiate spot foreign exchange transactions from
forward exchange transactions.
7. Calculate the return and risk of foreign exchange
transactions.
8. Point out ways that financial institutions can hedge
foreign exchange risk.
9. Identify the role of financial institutions in foreign
exchange transactions.
10. Analyze and explain the interaction of interest rates,
inflation, and exchange rates.
11. Describe purchasing power parity and interest rate
parity.
12. Explain how interest rate parity relates to the existence
or nonexistence of arbitrage opportunities.

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA

Educational Resources
A. Book
Mayo, H. B. Basic Finance:
10thedition.,South-Western
Cengage Learning.

An Introduction to Financial Institutions, Investments & Management.

References
Saunders, A. and Cornett M. Financial Markets and Institutions. 4th edition, McGraw-Hill.
Brigham, E. and Houston, J.
Learning Asia Pte Ltd.

Fundamentals of Financial Management. 13th edition,

2013Cengage

Gitman, Lawrence J., Zutter, Chad J. Principles of Managerial Finance. 13th edition. Addison Wesley.
Brigham, E., Houston, J., Chiang, Y., Lee, H., Ariffin, B., Fundamentals of Financial Management. 12th
ed., Cengage Learning.
B. Websites
http://www.fma.org/
Financial Management Association
www.investopedia.com
Finance Terms
http://finance-article.blogspot.com/
Relevant Finance Articles
www.fitcibca.com
Website of Fitch Ratings (international bond rating service)
www.moodys.com
Website of Moodys Investor Services
www.standardandpoors.com
Website of Standard and Poors (provider of investment information)
www://pse.com.ph
Philippines Stock Exchange
www.bsp.gov.ph
Bangko Sentral ng Pilipinas
www.sec.gov.ph
Securities and Exchange Commission
www.pdex.com.ph

Phillipine Dealing Exchange Corp.

Course Requirements
As a students in this course, you must comply with the following requirements:
1.

Attendance and Class Participation

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA
You are expected to attend all classes. Attendance in the lectures is very important because the lectures present new information
and provide background for the assignments. You are responsible for all of the material presented in lectures.
The USC Student Manual (2006 Edition) specifies that a student who incurs absences of more than 20% of the prescribed number
of class hours or laboratory periods during the term should be given NC or 5.0. A 3-unit course has 48 class hours. Students with
three absences are required to get a readmission permit from the college dean.
Class participation is evidenced by individual or group outputs from in-class exercises. These outputs shall be collected at the end
of a class meeting. In-class exercises could include Short quizzes, seatworks, and group discussions.
2.

Out-of-Class Learning Tasks and Assignments

To ensure learning engagement and constant timely practice, you are required to do out-of-class tasks in the form of small projects
and recommended problems relevant to a particular unit. To this end, you are required to have a notebook intended only for
exercises. From time to time, your exercise notebooks will be checked in order to assess the timeliness of your learning efforts.

3.

Tests and Examinations

A minimum of four (4) exams are given during the semester and are scheduled following the schedules set by the university. The
midterm exam and the final exam are three-hour examinations and require students to present valid examination permits for
participation in the examination.

Evaluation/Grading System
This course will follow the standard grading system of the university as follows:
For the Midterm Grade:
Tests/Quizzes
1/3
Other Assignments/requirements 1/3
Midterm Exam
1/3
For the Final Grade:
Midterm Grade
Class Standing after Midterm
Final Exam

1/3
1/3
1/3

GPA Scoring
For purposes of transmutation, the Department of Accountancy standard equivalents will be used as follows:
100-95
1.0
74-73
2.1
94-93
1.1
72-71
2.2
92-91
1.2
70-69
2.3
90-89
1.3
68-67
2.4
88-87
1.4
66-65
2.5
86-85
1.5
64-62
2.6
84-83
1.6
61-59
2.7
82-81
1.7
58-56
2.8
80-79
1.8
55-53
2.9
78-77
1.9
52-50
3.0
76-75
2.0
49 & below
5.0
Below 3.0 is equivalent to a failing grade of 5.0

Course Policies
Tardiness
Attendance will be checked 5 minutes after the scheduled start of the class. If you are not around during the roll call, you are
automatically marked late. Although occasional tardiness may be tolerated, habitual tardiness is not. Students who are habitually late
may be required to do extra learning tasks.
Special Assignments
Students are encouraged to work together on assignments and when studying. However, the product that you shall turn in must be your
own work, not a direct copy of someone elses work. Cases of copying shall be dealt with following the universitys procedures for
disciplinary actions. Note that the university considers dishonesty or any fraudulent act as a major offense. Thus, make sure that you do
your own work and that you protect them from plagiarism by others.
Special assignments that are submitted late may not be accepted.

AC 509 Business Finance with Introduction to Global Business Environment

COURSE COVERAGEAND LEARNING OUTCOMES
Second Semester, AY 2014-2015
Professor: Grace Socorro Larcena-Yomo, CPA, MBA

Missed Tests and Exams

If you miss to take a scheduled examination, you can make a formal written request to take a special examination if missing the
examination was due to a serious medical condition or due to an emergency. "EMERGENCY shall be understood as an unforeseen
combination of circumstances which calls for an immediate response to an urgent need for assistance or relief. Pertinent supporting
documents must be attached to your letter of request. The schedule of the special examination shall be set by the teacher.
Classroom Behavior
In class, students are expected to behave in a manner that would not unnecessarily disrupt classroom activities. The instructor reserves
the right to expel misbehaving students from the classroom. For one, use of cell phones during class hours is strictly prohibited; cell
phones used in class will be confiscated and surrendered to the Student Affairs Office. (Students are assumed to have read Section 2.5.4
to 2.5.12 of the USC Student Manual, 2006 edition.)

Classroom Management
1.

Attendance is a MUST. Students may incur only a total seven (7) absences. Otherwise, they will automatically be dropped
from class and receive a grade of either NC (No Credit) or a failing grade of 5.0 whichever is applicable.
2. Students who incur three (3) absences will be asked by the instructor to see the Department Chair to secure permission to be readmitted to class. A re-admission slip should be properly accomplished for this.
3. Tardiness is discouraged. It is a source of irritation and class disruption when students arrive late. Students who arrive 15
minutes after the start of class are considered tardy. Please note that three (3) tardiness is equivalent to one (1) absence.
4. A permanent seat plan will be made at the start of the semester. Students are advised to keep to their assigned seating
arrangement; otherwise, they will be marked absent for that day.
5. Classes should always start and end with a short prayer. The instructor can opt to lead the prayer or assign students to do this
alternately.
6. Students should assist in maintaining the orderliness and cleanliness of the classrooms. Graffiti writing is strictly prohibited.
Any student found violating this rule will be punished with the appropriate sanction. Before leaving the classroom, the
instructor with the help of the students, should ensure that no litter/garbage is left behind and that chairs are in their proper
order. Should the class be the last schedule for the day, the instructor should arrange that the lights and air conditioning units
are switched off.
7. Going out of the classroom at any time is strictly discouraged. Students should make it a habit to go to the restroom during
their vacant period or before the start of their classes. If they must visit the restroom, permission should be sought from the
instructor.
8. Use of mobile phones inside the classroom is strictly prohibited. They should be switched off or placed in silent mode before
entering classes. The instructor has the right to confiscate mobile phones that ring and/or are used during class hours. The
confiscated unit can only be claimed from the Deans Office at the end of the semester.
9. The teacher reserves the right to ask the student to leave the room if his behavior is disruptive in class.
10. It is the responsibility of the students to properly schedule their classes so that meals and snacks will be taken at the proper
time.
11. Students are encouraged to see the instructor during consultation hours for any concerns, questions and assistance with regards
to the course.