Finance 456/556 – International Financial Management
Portland State University
School of Business Administration
Winter Quarter, 2010
Instructor : Jim Hunter, MBA
Home Phone : 503 557 1891
Email : firstname.lastname@example.org
Office hours: Mon and Wed, 12PM to 2PM, by appointment, SBA 469
Class Period : Monday/Wednesday
Time: 10:15 – 12:05
Dates: January 4 – March 12
Final Exam : Wednesday, March 17, 10:15 – 12:05
PURPOSE: The primary purpose of the course is to examine and understand the
international aspects of financial management for the multinational business enterprise.
The course builds upon the principles of basic business finance and applies the basic
valuation framework of financial decision making to companies that operate in many
countries. In addition issues regarding currency and interest rate risk management as
well as cross border investing and borrowing are covered.
The financial management function of global firms can be divided into five distinct
segments for ease of understanding the manifold aspects of the subject. Each segment
listed below will be covered in detail.
1. Environment of International Financial Management
2. Foreign Exchange and Derivatives Markets
3. Foreign Exchange Risk Management
4. Financing the Multinational Corporation
5. Foreign Investment Analysis
6. Multinational Working Capital Management
METHOD : The course is conducted through a series of lectures, classwork and end of
chapter problems and handout problems. All of the problems will be discussed in class
the following session and are due at that time. Chapter notes in power point can be found
at my website at the SBA. In addition a Corporate Research Paper that covers most of
the above segments is required.
Mid term Exam 30 %
Final Exam 40 %
Corporate Research Paper 30 %
Both exams will be quantitative in nature and be based on the homework problems and
The level of class participation will be used to make any borderline decisions.
COURSE POLICIES : Each student is expected to read the assigned materials before
coming to class, attend all lectures, keep up with the topics covered, complete the
assigned work, be responsible for all in-class and email announcements, and take the
scheduled examinations. Homework will be collected but not graded. Failing to
demonstrate honesty and integrity will result in a grade of F for each assignment or
exam in which the dishonesty occurred.
TEXTBOOK : Multinational Financial Management, 9th Edition by Alan C. Shapiro,
published by Wiley
For international economics, see Paul Krugman and Maurice Obstfeld , “International
Economics : Theory and Practice”, 5th edition. Addison Wesley Publishing Company.
For international financial markets, see Richard M. Levich, “International Financial
Markets: Prices and Policies”, 2nd edition (McGraw Hill)
Other suggested readings
Euromoney Asia Money
The Economist Business Week
Wall Street Journal Asian Wall St. Journal
Treasury and Risk Management
CORPORATE RESEARCH PAPER
A 5 page narrative, plus exhibits, paper is required. At a minimum the questions and
issues below should be covered with particular emphasis on risk management and
offshore borrowing and investing activities. Due date is March 12.
A. What is the company’s Foreign Exchange (FX) Risk Management Policy?
Is centralized or decentralized?
o Head Office, Regional Offices, or Operating Subsidiaries
What types of exposure are measured and managed?
o Translation, Transaction and Economic or Operating Exposure
How has “Other Comprehensive Income”, an equity account, changed
o in recent years?
What hedging transactions are used for each type of exposure?
o Forward Contracts, Futures, Options and Swaps
o Cash Flow, Fair Value and Net Investment Hedges
How long a time frame is used to manage this risk?
o One year, several years etc.
B. How does the company use Derivatives for funding, investing, and other price risks?
C. What is the extent of the company’s offshore and Euromarket funding and investing
As a way of introduction the paper should outline the global reach of the corporation by
detailing the number of overseas subsidiaries, the geographic breakdown of sales, assets
and income, and their involvement in international trade.
The following companies are recommended:
Ford Motor Co. Intel
P&G Merck Pfizer
United Technology GE Dow Chemical IBM
TEXTBOOK HOMEWORK PROBLEMS
Chapter 2 1 ~ 5 and Exchange Rate Changes
4 1,3,4,5,7,8,9,11,12,13,and 15
5 BOP and GDP Connection
7 3,4 and FX Market Questions
8 Question 5 and Problems 1,4,5 and Futures and Options
9 1,2,3,5 and Interest Rate and Currency Swaps
10 1a and b only, 2,4,7,8,9 and Risk Management