Lovely Professional University,Punjab

Format For Instruction Plan [for Courses with Lectures and Tutorials

Course No Cours Title Course Planner Lectures Tutorial Practical Credits

MGT645 INTERNATIONAL FINANCIAL MANAGEMENT 11242 :: Harpreet Singh Bedi 3 1 0 4

Text Book: 1 Eun/Resnick, International Financial Management, Tata McGrawHill, 4th Edition

Other Specific Book:

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 Reading

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=1279096334&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"

1 Approved for Spring Session 2010-11

Relevant Websites

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

Week Number Lecture Number Lecture Topic Chapters/Sections of Homework to be Assigned Pedagogical tool
Textbook/other to students Demonstration/case
reference study/images/anmatio
n ctc. planned

Part 1
Week 1 Lecture 1 Financial Management In Global Context : Book :6,ch-1
Introduction, Emerging Challenges, Responsibilities
Of Finance Managers.
Lecture 2 Goals For International Financial Management, Book :1,Ch-1 Mini Case: Nike's
Globalisation Of World Economy : Recent Trends Decision & Case :
General electric
globalises
Lecture 3 Evolution Of International Monetary system In brief - Book :1,Ch-2
Bimetallism, 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 & Mini case : Will The
Costs Of EMU, ADRs & GDRs, SDRs. United Kingdom Join
The Euro Club
Lecture 6 Balance Of Payment Accounting, BOP Accounts ( Book :1,Ch-3 (Text Articles : Ref.10 & Case
Current Account, Capital Account, Statistical Book) Ch-5(Ref-2) : The Bank of Korea
Discrepancy, Official Reserve Account) reassesses its Reserve
(Ref-2, Ch-5)

2 Approved for Spring Session 2010-11

Week 3 Lecture 7 Global Financial Markets: Domestic & Offshore Book :1,Ch-5 (text Ref- 10 & 8
Markets, Euro Markets and its evolution Book) Ch-6 ( Ref-3)
Lecture 8 Economic impact of Euro and other Offshore Book :5,Ch-6 ( Ref-3) Term Paper 1 Allocation Case: Blades Inc
markets, Interest Rates In Global Financial Markets (Pg.78, Ref.6)

Lecture 9 Spot Rate Quotations: Direct and Indirect Book :1,Ch-5

quotations, Bid-Ask Spread, Spot Foreign Exchange
Market, Forward Foreign Exchange Market.

Week 4 Lecture 10 Exchange Rates, Cross Exchange Rates Book :1,Ch-5

Quotations, Triangular Arbitrage

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

Week 5 Lecture 13 Determination of Exchange Rates: Fundamentals of Book :2,Ch-2 HomeWork 2 Allocation Mini Case: Shrewsbury
Central Bank Intervention, The Equilibrium Herbal Products Ltd.
Approach to exchange rates. (ref-1)

Lecture 14 Interest Rate Parity: Parity conditions, Covered Book :1,Ch-6 Case: Blades Inc
Interest Rate Arbitrage (Pg.194)

Lecture 15 Interest Rate Parity: Uncovered Interest Rate

Arbitrage, Reasons for Deviation from Interest Rate
Parity.

Week 6 Lecture 16 Parity Conditions in International Finance: Law of Book :1,Ch-6 Ref-12
one Price, Purchasing Power Parity, PPP and the
Real exchange Rate

Lecture 17 Parity Conditions in International Finance: Fisher's

Effect, International Fisher Effect, Forecasting
exchage rates
Lecture 18 Country Risk and Political, Social and Economic Book :3,Ch-31(Ref-3) HomeWork 2 Submission
Risks Ch-6(Ref-2)

3 Approved for Spring Session 2010-11

Week 7 Lecture 19 Need for Risk Evaluation, Political Risk Analysis, Book :3,Ch-31(Ref-3) Quiz 1
Managing Political Risk Ch-6(Ref-2)
Lecture 20 Introduction to foreign exchange risk Exposure: Book :1,Ch-8 9 10
Meaning of 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 Book :1,Ch-7
preliminaries, basic currency future relationship,
Eurodollar interest rate future contracts.
Lecture 23 Futures on foreign exchange: Future Prices, Book :1,Ch-7 (Ref1) HomeWork 3 Allocation Case: Blades Inc
Expected spot prices, and forward prices, Hedging Ch-8 (Ref-2) (Pg.126 Ref.6)
and speculation with currency futures.
Lecture 24 Options on foreign Exchange: Meaning, How Book :1,Ch-7 Ref-11
options work
Week 9 Lecture 25 Options on foreign Exchange: Options on spot, Book :5,Ch-10
options on futures, and future style options, price
quotations,
Lecture 26 Options on foreign Exchange: Elementary option Book :6,Ch-5
strategies.
Lecture 27 Options on foreign Exchange: Hedging with Book :1,Ch-7(Ref-1)
currency options, Option Pricing (Binominal Model) Ch-8(Re-2)
Week 10 Lecture 28 Interest Rate Derivatives: Interest Rate Futures, Book :5,Ch-9 HomeWork 3 Submission
Short term & Long Term Interest Rate Futures
Lecture 29 Interest Rate Derivatives: Forward forwards, Book :2,Ch-9 HomeWork 4 Allocation
Forward Rate Agreement, Eurodollar Futures

Part 4
Week 10 Lecture 30 Swaps: Types of swaps, swap bank, Swap market Book :1,Ch-14
quotations, LIBOR, QSD
Week 11 Lecture 31 Interest Rate Swaps: Basic Interest Rate Swap, Book :1,Ch-14 Swaps: Ref-7
Fixed for floating interest rate swap, Picing the basic
Interest rate swap.
Lecture 32 Currency Swaps: Basic Currency Swap, Variation of Mini Case: The
Basic Currency and Interest Rate Swap, Risk of Centralia Corporations
Interest Rate and Currency Swaps Currency Swap (Ref-1,
Pg. 355)

4 Approved for Spring Session 2010-11

 Week 11 Lecture 33 Economic Exposure, Determinants of economic Book :1,Ch-9 Term Paper 1 Submission
exposure, Managing the economic exposure
Week 12 Lecture 34 Management of Transaction Exposure: Meaning of Book :1,Ch-8
Transaction Exposure, Forward market Hedge,
Money Market Hedge
Lecture 35 Management of Transaction Exposure: Option HomeWork 4 Submission Case Study: Chase
Market Hedge, Cross Hedging Minor Currency Options, Inc.: Hedging
Exposure, Hedging Contingent Exposure. foreign currency
exposure through
currency options.(ref-1,
Pg. 215)
Lecture 36 Management of Transaction Exposure: Hedging Book :1,Ch-8 (Ref-1) Quiz 2
Recurrent Exposure with Swap Contracts, Hedging Ch-10(Ref-2)
through Invoice Currency, Lead/Lag strategy,
Exposure netting.
Week 13 Lecture 37 Management of Translation Exposure: Current/Non Book :1,Ch-10 Case Study:
current method, Monetary/non-monetary method, Metallgesellschaft's
Temporal method, current rate method Hedging Debacle
Lecture 38 Management of Translation Exposure: Translation
exposure vs 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

Homework No. Topic of the Homework Nature of homework
(group/individuals/field work
Homework 1 A group of 2 students will be asked to visit the website of company assigned by the instructor.Eamine its Group
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 2 Numerical/Practical problems on Interest Rate Parity, Exchange Rate Determination, PPP, Test will be Individual
taken based on this assignment.
Homework 3 Numerical/Practical problems on FOREX, Futures, Options Test will be taken based on this assignment. Individual

5 Approved for Spring Session 2010-11

Homework 4 Numerical/Practical problems on, Swaps, Transaction Exposure, Operating Exposure. Test will be taken Individual
based on this assignment.

Scheme for CA:out of 100*

Component Frequency Out Of Each Marks Total Marks
Quiz 2 15 30
Term Paper 1 25 25
Homework 3 4 15 45

Total :- 55 100

* 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

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.

6 Approved for Spring Session 2010-11

 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)
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?

Plan for Tutorial: (Please do not use these time slots for syllabus coverage)
Tutorial No. Lecture 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, Term Paper Review 1 Problem solving
Tutorial 6 HW based test 2 HW 2 based test
Tutorial 7 Country Risk Analysis

After Mid-Term
Tutorial 8 Futures on FOREX Problem solving
Tutorial 9 Options on FOREX, Term Paper Review 2 Problem solving
Tutorial 10 HW 3 based test HW 3 based test
Tutorial 11 Swaps on FOREX Case analysis
Tutorial 12 Management of Transaction & Operating Exposure, HW Case analysis,HW 4 based test
4 based test
Tutorial 13 Doubt-clearing session

7 Approved for Spring Session 2010-11