BUSINESS FINANCE Political Risk by MikeJenny


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									                                BUSINESS FINANCE 725
                           International Financial Management
                              Syllabus - Spring Quarter 2006

Instructor: Alvaro Taboada
Office: 606 Fisher Hall
Phone: 292-7562
E- mail:
Office Hours: by appointment
Course Objectives
This course applies the principles of investment analysis and financial management to the
international arena. The goal is to provide a framework for making sound financial
decisions in an international context. The course will be divided into three sections:
1) The international financial environment; 2) international investment analysis, and 3)
topics in international corporate finance. We will explore issues in exchange rate risk
management, country risk, and cross-border investment analysis, as well as the most
recent developments in global financial markets.

Text and Materials
The required text for this course is International Financial Management (4th edition) by
Cheol S. Eun, and Bruce G. Resnick.
There is a required course packet that includes HBS Note 9-292-084 “Note on Cross-
Border Valuation” and HBS Case 9-204-144 “Offshoring at Global Information Systems,
Inc.” The packet is available at COP-Ez.
Lecture Notes: available from course web site.

BUS ADM 555 and BUS FIN 620 are the formal prerequisites for this course. BUS FIN
722 and 722 are recommended.
Students are expected to be familiar with such topics as: discounted cash flows, net
present value, basic statistics (mean, standard deviation, regression analysis, etc.). If you
do not feel comfortable with these topics, please get yourself up to speed with this
material promptly.
You should be comfortable using Excel.

Grades will be determined as follows:
Exams (2): 30% each. Final exam will be cumulative.
Homework assignments (2): 5% each
Case: 5%
Country Report/Presentation: 15%
Class participation: 10%
There will be one midterm exam and one final exam. The exams will cover material
from lectures, assigned readings, and assigned problems. The final exam will be
comprehensive. You are allowed to bring a calculator to the exams. I will provide a
formula sheet for each exam so that you will not have to memorize formulas.

Homework Assignments
There will be two homework assignments worth 10% of your grade. The assignments
will consist of problem sets and direct applications of the material covered in class. The
use of Excel may be needed to complete certain parts of the homework assignments.

Country Report and In-Class Presentation
Groups of up to five students are required to hand in a professionally written report on a
country of their choosing by the beginning of class on Thursday, May 25th . In addition,
each group is expected to follow any new develop ments in their selected countries
throughout the course of the quarter. Each week I will randomly ask students to discuss
recent developments in their chosen countries, emphasizing the potential impact of these
developments on international investment. The report should incorporate a detailed study
of the economic, political, and financial environment of the respective countries. The
report should be typed and should not exceed four pages. The idea is to produce a report
that provides an investment recommendation to a multinational corporation that is
planning to invest in that country. Each group must be formed and must decide which
country they will follow by the end of the third class meeting (April 4th). More
information about the report will be discussed in class.

In addition to the written assignment, each group will give a 10- minute presentation of
their report during the last two weeks of class (May 25th and May 30th ).

A case study, “Offshoring at Global Information Systems, Inc.” will be discussed during
class on May 23rd. Students are required to hand in a written report at the beginning of
class on May 23rd. The write-ups should not exceed four pages. Case questions will be
posted to the course website.

Class Participation/Attendance
As much of the learning in this course occurs in the classroom, it is important that all
students attend classes. I expect all students to actively participate in class discussions by
asking thoughtful questions, sharing their views on particular issues, etc. Just showing
up to class will not entitle you to class participation points. You must actively participate
in discussions to earn such points.

Students who request help will be given reasonable accommodation through the advice
and assistance of the University Office of Disability Services.
Grading errors should be corrected. Appeals must be in writing, within one week after
the graded work is returned. This appeal should include a description of the questions
that need to be reexamined as well as an explanation of why the original grade was
incorrect. In general, the entire document will be checked for grading errors, and
correcting these could result in a higher or lower score.

Academic Integrity
You have affirmed to adhere to the following statement:

As a member of the Fisher College of Business community, I am personally committed to
the highest standards of ethical behavior. Honesty and integrity are the foundation from
which I will measure my actions. I will hold myself accountable to adhere to these
standards. As a leader of the community and business environment, I will pledge to live
by these principles and celebrate those who share these ideals.

In addition, the University’s Code of Academic Integrity is designed to ensure that the
principles of academic honesty and integrity are upheld. All students are expected to
adhere to this Code. Please visit the following website for more information on the
University’s     Code     of    Academic     Integrity    and     possible   sanctions: In accordance with University Faculty Rule 333-5-487, all
instances of academic misconduct will be reported to the Department and the Committee
on Academic Misconduct, which recommends appropriate sanctions to the Office of
Academic Affairs. Academic misconduct includes, but is not limited to, giving or
receiving information during an exam and submitting plagiarized work for academic
                                 Tentative Course Schedule*
3/28/2006        Introduction and course overview
                 Required Reading: Chapter 1
3/30/2006        International Monetary System
                 Required Readings: Chapter 2
                 Mini Case: Will the UK Join the Euro Club?
4/4/2006         The Foreign Exchange Market
                 Required Reading: Chapter 5
4/6/2006         The Foreign Exchange Market (cont’d)
                 Homework 1 handed out.
4/11/2006        Exchange Rates and International Parity Relations
                 Required Reading: Chapter 6
4/13/2006        Foreign Exchange Options
                 Required Reading: Chapter 7
                 Mini Case: The Options Speculator
4/18/2006        International Equity Markets
                 Required Reading: Chapter 13
4/20/2006        International Bond Markets and Currency Swaps
                 Required Reading: Chapters 12 & 14 (skip section on interest rate swaps)
4/25/2006        International Portfolio Investment
                 Required Reading: Chapter 15
                 Homework 1 is due.
                 Mini Case: Solving for the Optimal International Portfolio (in textbook)
4/27/2006        International Banking and the Money Market
                 Required Reading: Chapter 11
5/2/2006         Review Session
5/4/2006         Midterm Exam
5/9/2006         Risk Management and Transaction Exposure to Exchange Rates
                 Required Reading: Chapter 8
                 Case: Chase Options, Inc. (in textbook)
                 Homework 2 handed out.
5/11/2006        Risk Management of Economic Exposure to Exchange Rates
                 Required Reading: Chapter 9
5/16/2006        International Capital Budgeting
                 Required Reading: Chapter 18; Note on Valuation and Capital Budgeting (HBS
                 9-292-084) – in course packet.
5/18/2006        Foreign Direct Investment and Political Risk
                 Required Reading: Chapter 16
                 Mini Case: Enron vs. Bombay Politicians (in textbook) - Homework 2 is due.
5/23/2006        Case: Offshoring and at Global Information Systems
                 Case due at the beginning of class.
5/25/2006        Group Presentations – Country Reports
5/30/2006        Group Presentations – Country Reports
6/1/2006         Review Session
                 Final Exam – as scheduled by the university
* Schedule subject to change during the course of the quarter.

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