FINANCE 4550 - INTERNATIONAL FINANCE
Course Designation: Finan 4550 - International Finance; Offered through the Department of
Finance (Academic); 3.0 Credit hours
Time and Location: Section 001: M & W, 7:30am - 8:50am, CRCC 215
Section 002: M & W, 2:00pm - 3:20pm, FAMB 204
Prerequisites: Finan 3040 - Financial Management
Instructor: Robert A. Lutz
Associate Professor (Lecturer) of Finance
Office & Telephone: BuO 331; 585-5717 (Office); 294-8737 (Home)
Office Hours: M & W 9:00am - 10:00am
This course examines the differences between domestic and international financial management.
Political and economic principles governing financing of international transactions, balance of
payments between nations, adjustment mechanism to deficits (surpluses), international finance
institutions and structures, foreign exchange markets, and risk management will be discussed.
International Finance addresses a number of social and cultural issues, including differences in
norms, ideals, and traditions, and how such differences impact decision-making models. This
course examines the dynamics of how a changing global financial environment demands
adaptability and an understanding of differences in goals and objectives that exist worldwide.
We will compare and contrast the nature of today’s marketplace for international trade and
financial instruments to traditional arrangements, and view how our current marketplace has
evolved through an increased understanding of different approaches and attitudes toward
multinational business activities.
Upon successful completion of this course, students should be able to demonstrate knowledge
and understanding of: (1) economic principles which drive competitive equilibria in international
trade, foreign exchange markets, and global capital markets; and (2) objective decision making
rules and processes for investment and financing decisions made by corporate financial managers
of multinational corporations. Following completion of this course, students should have gained
an increased awareness of how decision-making paradigms are influenced by cultural attitudes
and responsiveness to a changing global economic environment. It is expected that students will
come away from this course with the ability to accept, understand, and adapt to the differences
between others’ goals and the traditional decision-making objectives of U.S.-based multinational
corporations. In particular, students should be able to see international financial decisions from a
variety of perspectives, be up-to-date on contemporary issues in multinational economics and
international financial management, and should be able to identify and explain economic and
political connections between the United States and other communities of the world.
Books and Materials
The required text is: Madura, J., International Financial Managment, Thompson/South-Western,
8th ed., 2006 (ISBN 0-324-31948-7). Text website: finance.swlearning.com. A good quality
financial calculator will also be useful. I use and recommend the HP-17B.
Students will be expected to stay abreast of current events in the financial world, international
business, and international politics (as it affects business). Periodic reading assignments from
The Wall Street Journal will be given, with summary write-ups to be submitted for grades; a
subscription to the WSJ is recommended. See subscribe.wsj.com/student for special rates.
Final class grades are based on the performance on the following assignments and examinations:
Midterm 1 100 pts
Midterm 2 100 pts
Final exam 100 pts
Homework 25-50 pts*
Total 325-350 pts.*
Individual exams will not receive letter grades. Final course grades will be based on the
percentage of total points possible earned, using the customary grading scale (i.e. 90's - A’s, 80's
- B’s, etc.). The grading scale may be adjusted downward to reflect relative class performance.
The grading objective is to achieve an average class grade in the target range of the DESB: 2.8 -
3.2 (for classes at 4000 level).
Regular assignments for practice exercises from the text will be provided in class. These will be
for practice only, and the solutions will be provided via WebCT. Graded assignments will come
from regular WSJ reading assignments, as well as one or two simple mini cases.
* Point total may vary depending on the number of journal articles assigned as homework
Rights and Responsibilities
“All students are expected to maintain professional behavior in the classroom setting, according
to the Student Code, spelled out in the Student Handbook. Students have specific rights in the
classroom as detailed in Article III of the Code. The Code also specifies proscribed conduct
(Article XI) that involves cheating on tests, plagiarism, and/or collusion, as well as fraud, theft,
etc. Students should read the Code carefully and know they are responsible for the content.
According to Faculty Rules and Regulations, it is the faculty responsibility to enforce responsible
classroom behaviors, and I will do so, beginning with verbal warnings and progressing to
dismissal from class and a failing grade. Students have the right to appeal such action to the
Student Behavior Committee.”
Each student is expected to abide by the following rules. Any disagreement with the class rules
should be addressed with the instructor during the first two weeks of the semester. Otherwise it
will be assumed that the student has accepted the class rules as written.
1) The weekly schedule is subject to change. Students are responsible for regular class
attendance to keep informed of any changes, including exam date changes.
2) The last day to drop this class is 1/17. The last day to add the class is 1/22. The last day
to withdraw is 3/2. No one will be allowed to withdraw from this class for academic
reasons after the withdrawal deadline. For further information about University drop/add
policy, see http://www.admin.utah.edu/ppmanual/9/9-7.html (Sec. 8:Grades).
3) Phones and pagers must not ring during class. Please remember to turn them off before
class begins. Allowing phones to ring during class is disruptive and disrespectful of the
instructor and other students.
4) Test formats and rules may vary from test to test, and will be announced prior to each
5) Students are expected to take exams on the scheduled dates (subject to date changes, see
rule 1). Vacation schedules are not considered reasonable reasons for rescheduling
exams, nor is having more than one final on the same day. I reserve the right to reject
any excuse for not taking an exam when scheduled, or for failing to turn in homework on
its due date.
6) Class grading will be done in accordance with University, DESB and Department of
Finance policy. Departmental policy requires that students achieve a minimum level of
learning and mastery of the material presented (to be determined by the instructors) in
order to receive a passing grade of C- or better. A copy of the DESB grading policy is
available upon request.
7) Graded homework will be assigned periodically. Information necessary to successful
completion may be delivered in class only.
The following statement is included for the benefit of those to whom it may apply:
“The University seeks to provide equal access to its programs, services and activities for people
with disabilities. If you will need accomodations in this class, reasonable prior notice needs to
be given to the Center for Disability Services, 162 Union Building, 581-5020 (V/TDD). CDS
will work with you and the instructor to make arrangements for accommodations.”
The course will progress through the text material in the following order:
Weeks Chapter(s) Topics
1 1 Overview
2 2 Flow of Funds
3 3 International Financial Markets
4 4 Exchange Rate Determination
5 5 Derivatives
6 6 Government Influence on Exchange Rates
7 6 Government Influence (cont.)
8 7 Arbitrage and Interest Rate Parity
9 8 Inflation, Interest Rates, & Exchange Rates
10 11 Managing Transaction Exposure
12 Economic Exposure
11 Spring break
12 13 Direct Foreign Investment
13 14 Multinational Capital Budgeting
14 17 Cost of Capital
15 18 Long Term Financing
16 19, 20 Trade Financing, Short-Term Financing
17 - Final Exam
Monday, February 12 Midterm Exam #1
Monday, March 26 Midterm Exam #2
Friday, April 27 Final Exam, 8:00am - 10:00am (Section I)
Monday, April 30 Final Exam, 1:00pm - 3:00pm (Section II)
Monday, January 15th Martin Luther King - Civil Rights Day Holiday
Monday, February 19th Presidents’ Day Holiday
March 19th to 23rd Spring break