FRL 353 Section 1 Multinational Financial Market CRN # 72109 Tuesday & Thursday: 10:00-11:50 a.m. Fall Quarter 2004 Building 6 Room 107 P. Sarmas www.csupomona.edu/~psarmas Catalog Description: Institutional overview of structure and application function of international financial markets and their applications. International financial systems, capital flows, foreign exchange risk measurement and management. Eurocurrency markets, Asian currency markets, international capital markets, international banking, international debt crisis, and export-import financing. 4 lecture/problem-solving. Prerequisite: FRL 307 or FRL 301. Required Background or Experience: Prerequisite: FRL 301 Prerequisite Justification: General Education Contributions: A number of issues and problems in the course will require the basic knowledge of financial management that is covered in FRL 301. The student is expected to have the ability to express himself/herself both orally and in writing (ENG 104). The student also needs basic economic concepts for understanding the course (EC 201). Finally, the student is expected to use basic analytical skills to develop relevant relationships among variables. Expected Outcomes: Students are expected to acquire and demonstrate knowledge of the fundamental principles and issues in the international financial markets. Students should be able to define basic terminology, to state theoretical relationships and to identify the key issues for international financial management. They should be able to (1) understand final markets and systems from a global perspective, (2) analyze relationships among exchange rates and macro variables, (3) to measure and manage foreign exchange risk, and (4) to identify country risk, political risk and financial risk.
FRL 353 Multinational Financial Markets Fall 2004 2 Expanded Description of the Course: This course extends the principles of finance covered in FRL 306/300 and FRL 307/301 to the international context. The course provides an overview of the global financial environment and an introduction to exchange rate behavior. Next, the course covers the relationships between inflation, interest rates, and exchange rates. Later, the focus shifts to measuring and managing risk exposures resulting from exchange rate fluctuations. The final part of the course covers financing from a global perspective and global strategic planning. Academic Integrity: The University is committed to maintaining academic integrity throughout the University community. Academic dishonesty is a serious offense that can diminish the quality of scholarship, the academic environment, the academic reputation, and the quality of a Cal Poly degree. Please read the University catalog to learn about academic dishonesty at Cal Poly and to the responsibility of students, faculty, and administrators relating to this subject. Required Text: Author: Jeff Madura Title: International Financial Management Publisher: South-Western College Publishing: Seventh Edition, 2003 Wall Street Journal Article Interactive Wall Street Journal Recommend Texts: Alan C. Shapiro Foundations of Multinational Financial Management Prentice Hall: Third Edition, 1998 David K, Eiteman, Arthur I. Stonehill, and Michael H. Moffett Multinational Business Finance Addison-Wesley Publishing: Eighth Edition, 1998 Further References: For Statistical data: IMF Financial Statistics, OECD Economic Outlook, International Economic indicators, and OECD Main Economic Indicators. For current international issues: The Economist, Euromoney, World Financial Markets, and IMF World Economic Outlook.
FRL 353 Multinational Financial Markets Fall 2004 3 Course Requirements: 1. Class attendance and participation is required. 2. Reading the assigned chapter(s) and the Wall Street Journal articles prior to the meeting. 3. Completing the mid-term and final examinations. 4. Make sure that your phone is turned off during the lecture in the classroom. Playing with phone by any one in the classroom would result in 5 Points deduction applied to all students enrolled in the course. 5. Please note that there is NO make-up examination. Examination 1. Please note that you will need to present your student ID at the time of examination. 2. You will be asked to sign the attendance sheet during the exam. 3. Turn-off your cell phones and pagers. 4. You cannot leave the classroom after examinations are distributed. 5. You will have to bring your own scantron and calculator (simple financial calculator). 6. Palm-held computer or programmable calculators are not permitted. 7. You will be provided with a formula sheet. 8. You will have to show all your calculations in the problem section for full credit. 9. Your writing should be legible in the essay section for full credit. 10. Each examination consists of multiple-choices, short-problem, and short-essay questions. 11. You may submit a self-addressed-stamped envelope, if you wish to receive your grade early. NO grades will be released via e-mail or telephone. 12. Check your final examination schedule. If you have more than two final examinations on the same day, make prior arrangements or drop this course. 13. ABSOLUTELY NO MAKE-UP! Course Assistance Office Information Office Hours Location: Building 66, #219 Wednesday 9:00 a.m. 12:00 noon Telephone: (909) 869 2405 Tuesday & Thursday 9:00 a.m. 10:00 a.m. Fax: (909) 869 2124 E-Mail: psarmas@csupomona.edu Others: By appointment
FRL 353 Multinational Financial Markets Fall 2004 4 Course Grade Grades are determined in the following format: Mid-Term Exam I... 30 percent Mid-Term Exam II... 30 percent Final Examination... 40 percent If necessary the course grade will be curved to meet a course-average GPA of 2.0 of C. The course grade is based on the following scale: Score Grade Score Grade Score Grade Score Grade Score Grade 93 A 86 B+ 76 C+ 66 D+ 0 F 90 A- 83 B 73 C 63 D 80 B- 70 C- 60 D- Important Dates Dates Events September 29 Last day to withdraw without W September 30 Last day to ADD October 13 Last day to withdraw without a petition October 14 Mid-term examination 1 November 12 Withdrawal from class only for emergency. November 16 Mid-term examination 2 December 9, 2004 Final Examination (9:10-11:10 a.m.)
FRL 353 Multinational Financial Markets Fall 2004 5 Thursday: September 23 Class List Check Course Introduction LECTURE SCHEDULE Chapter One: Multinational Financial Management: An Overview Goals of the MNC Theories of International Business International Business Methods Tuesday: September 28 Chapter One: Multinational Financial Management: An Overview Increased Globalization International Opportunities and Risk Chapter Two: International Flow of Funds Balance of Payments International Trade Flows Factors Affecting the Current Account Correcting a Balance of Trade Deficit Thursday: September 30 Chapter Two: International Flow of Funds Factors Affecting the Capital Accounts International Capital Flow Agencies that Promote International Flow Chapter Three: The International Financial Markets Motives of Using International Financial Markets Foreign Exchange Market Eurocurrency Market Eurocredit Market
FRL 353 Multinational Financial Markets Fall 2004 6 Tuesday: October 5 Chapter Three: The International Financial Markets Eurobond Market Comparing Interest Rates among Currencies International Stock Market Use of International Financial Markets Chapter Four: Exchange Rate Determination Measuring Exchange Rate Movement Exchange Rate Equilibrium Thursday: October 7 Chapter Four: Exchange Rate Determination Factors that Influence Exchange Rates Relative Inflation Rates Government Controls Interaction of Factors Tuesday: October 12 Chapter Four: Exchange Rate Determination How Factors Have Influenced Exchange Rates Speculating on Anticipated Exchange Rate Relative Interest Rates Relative Income Levels Thursday: October 14 Mid-term Exam 1: Chapters 1-3 & Wall Street Journal articles Chapter Five: Currency Futures and Options Forward Market Currency Futures Market Currency Options Market
FRL 353 Multinational Financial Markets Fall 2004 7 Tuesday: October 19 Review of Mid-term Examination Chapter Five: Currency Futures and Options Currency Call Options Currency Put Options Conditional Currency Options European Currency Options Thursday: October 21 Chapter Six: Government Influence of Exchange Rates Exchange Rate Systems Exchange Rate Mechanism A Single European Currency Tuesday: October 26 Chapter Six: Government Influence of Exchange Rates Government Intervention Exchange Rate Target Zone Intervention as a Policy Tool Thursday: October 28 Chapter Seven: International Arbitrage and Interest Rate Parity International Arbitrage Interest Rate Parity Correlation Between Spot and Forward Rates Tuesday: November 2 Chapter Eight: Relationships Between Inflation, Interest Rates, & Exchange Rates Purchasing Power Parity International Fisher Effect Comparison of IRP, PPP, and IFE Theories Thursday: November 4 Chapter Nine: Forecasting Exchange Rates Why Firms Forecast Exchange Rates Forecasting Techniques
FRL 353 Multinational Financial Markets Fall 2004 8 Tuesday: November 9 Chapter Nine: Forecasting Exchange Rates Evaluation of Forecasting Performance Forecasting Exchange Rate Volatility Tuesday: November 11 - Holiday Tuesday: November 16 Mid-term Exam 2: Chapters 4-7 & Wall Street Journal articles Chapter Ten: Measuring Exposure to Exchange Rate Fluctuations Is Exchange Rate Risk Relevant? Thursday: November 18 Review of Mid-term Examination Chapter Ten: Measuring Exposure to Exchange Rate Fluctuations Transaction Exposure Economic Exposure Tuesday: November 23 Chapter Eleven: Managing Transaction Exposure Transaction Exposure Techniques to Eliminate Transaction Exposure Hedging Long-Term Transaction Exposure Thursday: November 25 - Holiday Tuesday: November 30 Chapter Twelve: Managing Economic Exposure and Translation Exposure Economic Exposure Managing Translation Exposure Thursday: December 2 Chapter Sixteen: Country Risk Analysis Why Country Risk Analysis is Important Types of Country Risk Political Risk Factors Financial Risk Factors Final Examination Cumulative Examination Thursday: December 9, 2004 9:10 a.m. 11:10 a.m.