Mgt 448 Global Financing and Exchange Rate by ima13050

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									                           University of Texas at San Antonio
                                 College of Business
                            INTERNATIONAL FINANCE: FIN 4613
                                  COURSE SYLLABUS
                                   Summer Session I, 2010

Instructor:     John M. Drabier
                Visiting Professor of Finance.
                St. Mary’s University

Career:        US Navy 1974-1978, Naval Special Warfare Command,
               Instructor: Naval Amphibious Warfare School, Coronado, Ca.
               Deployed Far East Operations: Taiwan, S. Korea, Japan, the Philippines,
               and the Republic of South Vietnam (1975).




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                Civilian:
                Caterpillar Tractor World Headquarters, Peoria, Ill. 1981-85.
                Financial Service Firms (1987-present) including: EF Hutton,
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                Shearson Lehman Bros., Prudential Securities, Principle Financial Securities,
                Raymond James and Associates, and USAA Mutual Funds.


Office:       Room# 4.03.48
Department of Finance: Tel: 448-6315

Email:        johndrabier@hotmail.com
Office Hours: Monday through Thursday, 11AM-12:30PM, or by appointment.
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Class Schedule: Monday through Friday, 9:15AM-10:45PM, Room# TBA

Prerequisites needed to attend this class:
MGT 3003 and FIN 3014 or equivalent.
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Catalog Description of the Course: The course addresses the historical, institutional, and empirical
aspects of the foreign exchange market, the Eurocurrency market and the international bond market.
The managerial implementation of international financial hedging instruments in global oriented
business organizations is stressed.

Read this Syllabus: The conduct of this course is described in this syllabus. It is important that you
read and fully understand the terms, conditions, and procedures to be used in administering and
teaching this course. There will be no exceptions to the rules described herein.

Texts and Supplement Materials: Students should purchase the following textbook: Eiteman, D.,
A. Stonehill, and M. Moffett, Multinational Business Finance, 11th ed., Pearson/Addison-
Wesley, 2007 [ESM]. This will serve as the primary textbook for the course. In addition, we will
also use my lecture notes, International Finance for the International Financially Challenged. I
will also use my own PowerPoint slides for this course. The lecture notes and the slides will be
placed on Blackboard after the first day of class. I also reserve the right to introduce new material as
and when necessary. This material will also be distributed in class, or placed on Blackboard, as and
when appropriate. Some of these materials may be linked to current events.
Course Description: This course will deal with the following topics: International trade; currency
markets; exchange rate systems; the history of the international monetary system; forward markets,
futures and options markets; international currency hedging, speculation, borrowing, lending, and
arbitrage will be explored. The course will conclude with a look at exchange rate parity
relationships, international balance of payments, international trade and foreign direct investment
theories. It is important to understand that a problem solving approach to develop and reinforce
theoretical concepts will be utilized throughout the course. Consequently, each class in general will
develop the theory, followed by problem solving to illustrate the theory. Each lecture will conclude
by highlighting the main conceptual issues developed in the lecture. It is the students' responsibility
to read the assigned readings for the class and come prepared with possible solutions to the assigned
problems for the week.

Course Goals and Objectives:

The objective of the course is to develop conceptual and analytical skills related to international
financial management issues. The goals for this course are those stated as educational goals by the




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UTSA College of Business and Administration:

        1. An understanding of historic and current practices and theoretical concepts relevant to
           business and management today and useful for future organizational decision-making.
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       2. Skills in critical and strategic thinking, oral and written expression, and creativity.

       3. The competence, confidence, and self-esteem to deal with business and personal
          responsibilities.

       4.   The motivation, knowledge, and skills that encourage a lifetime of learning.

       This course contributes to the development of knowledge and skills needed to manage
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       effectively within an international finance context. Thus, specific objectives include:

   1. Providing students with a better understanding of the issues affecting the business finance
      function in an interdependent world;

   2. Enhancing students' knowledge of the effects that different social, cultural, economic
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      political, legal, and technological environments have on the finance function within a
      multinational firm;

   3. Enhancing students' decision-making and problem-solving skills within an international
   setting.

   4. Enhancing student’s ability to communicate clearly, concisely, accurately and effectively-both
   orally and in writing--with topics related to international finance.

        These objectives will be achieved through discussion of assigned readings, written case projects
        and exams.

Method of Instruction

A combination of lectures, class discussions, case analyses, and exams and quizzes will be used in this
course. Emphasis is placed on the sharing of ideas and the seeking of solutions to managerial problems
within an "international finance" environment. Therefore, your commitment to attending classes
regularly, participating actively in class discussions, and preparing assignments conscientiously is of
utmost importance.
Course Policies:

    1. Attendance and Tardiness: I concur with UTSA College of Business Catalog statement that
       "Class attendance is related to academic success, and class participation contributes to the
       synergies of the education process". If a student arrives late to class, or needs to leave class
       early, they should do so with minimal disruptions.

    2. Academic Honesty: I expect all students to maintain the highest standards of academic
       honesty. I will follow the University's policy on cheating and plagiarizing in that anyone found
       guilty will receive an "F" for the course and all such incidents will be reported to the Dean for
       further disciplinary action. Please read the attached copy of the University policy on
       academic dishonesty.


Study Groups: The formation of individual study groups is encouraged. Studying in a group is
recommended, especially for those that find the material difficult.




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Grading: The grading for this course will be organized as follows:

MID TERM                                20%
Quizes and Exercises
Articles
Homework Assignments
Final Exam
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                                        10%
                                        15%
                                        40%
Total                                   100%
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Midterm and Final Exams:

The midterm exam will be a take-home exam. Under no circumstances will a missed mid term exam
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be “made up”. Instead, the points missed on a mid term exam will be allocated proportionately
across the remaining exams. No exceptions to this rule are allowed. The midterm exam and the
final exam are open book and open notes. The exams are generally going to be a combination of
theory and problems. They will test your ability to understand and apply the material. As a result, the
best way to prepare for the exams is to make sure you understand the materials. Once again, make
sure that you understand the materials. In addition, you should also bear in mind that the final exam
is generally going to be more difficult than the mid term exam. Consequently, your preparation for
the final exam should take this aspect into account. Your final grade will critically depend on your
performance in your final exam.
Articles:

Review a current article related to international finance. I do not mean academic articles, but a one or
two page article in The Economist, Business Week, the Wall Street Journal, etc. The most important
requirement is that the selected article should be related to a topic covered in class. Each student is
required to provide the following with each report:

a) A copy of the original article.
b) A paragraph to summarize the article.
c) Another paragraph (or 2) to indicate how this article is related to topics covered in class.
d) A paragraph containing your critical comments.
(Your report should contain no more than 1 page).

Before you submit your report, you should ensure that there are no typographical and grammatical




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errors. Your report should be "professional" in style. If a paper does not meet the above criterion,
then it will be sent back to the student. Students can pass this course only if they turn in a
satisfactory report.       AF
        Your final course grade will be based on system presented below. Please note that although
the percentage of total course points required to earn a given grade may be lower than noted below,
students are guaranteed to receive the grades noted if they earn at least the given percentages of total
course points.



        Greater Than or Equal To:                Less Than:                   Guaranteed Grade
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                  95%                                95%                             A

                  90 %                               90%                             A-
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                  87%                                87%                             B+

                  84%                                 84%                             B

                  80%                                 80%                             B-

                  77 %                                77%                             C+

                  70%                                 76%                             C

                  60%                                 69%                             D

                  0%                                  59%                             F
Review of Mid Term Exam Results: The midterm exam will be returned. However, if the student wants
the instructor to review the grading, such review will only be conducted in class at the time the exam is
returned. This will generally be the class meeting immediately following the exam (June 15). It is
therefore very important that students attend this class. Under no circumstances will grades be changed
after this period.

Please Note: The use of calculators for exams is a necessity. The HP 10bII is an excellent financial
calculator and is moderately priced. Plan ahead because sharing calculators during exams is not
permitted. Please also note that the topical outline (presented below) also makes reference to selected
problems from your textbook. These problems will be turned in on every Friday of the week.




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                              Schedule of Assignments



Date                          Chapter/Topics                       Assignments
                                                                       (Due Dates)

June 1                      Introduction to the course

June 2-4          Chapter# 6: The Foreign Exchange Market                   June 4
                              (Lecture Notes: pages#1-15)
                                           Responses to Questions# 1-10, Pages# 202




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                  Mini-Case Page# 197: “The Venezuelan Bolivar…”Respond to Ques#1-3.

            Included in this chapter:
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                - Exchange Rates: Definitions and terminology
                         -Direct and Indirect Quotes
                         -European and American terms
                         -Bid and Ask Spreads
                         -Cross Rates
                        - What determines exchange rates?
                 -Major participants
                        -Banks and Non-bank Foreign Exchange Dealers
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                        -Individuals and Firms
                        -Speculators and Arbitrageurs
                        -Central Banks and Treasuries
                        - Foreign Exchange Brokers
                -The Various Markets for Foreign Exchange
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                        -The Spot Market
                        -The Forward Market
                        -Currency Futures and Options
                        -Currency Swaps

June 7-11       Chapter#7: Foreign Currency Derivatives                   June 11
                            (Lecture Notes: pages# 15-32)
                                        Responses to Questions# 1-10, Pages#240-1
                  Mini-Case Page# 235: “Rogue Trader, Nick Leeson”. Ques#1-8.

            Included in this chapter:

                -Terminology
                -Foreign Currency Futures
                -Foreign Currency Options
                     Chapter#8: Transaction Exposure
                                   (Lecture Notes: pages# 65-82)
                                                         Responses to Questions#1-11, Page#280.
                                          Mini-case Page#274: “Xian-Janssen Pharmaceutical and-
                                          the Euro” (If time permits).Respond to Ques#1-4 P# 277.
                Included in this chapter:

                  -Forward Market Hedging
                  -Money Market Hedging
                  -Hedging with Currency Futures
                  -Hedging with Currency Options
                  - No Hedging Strategy
                  Take-home Midterm Exam due Monday, June 14.




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June 14-18        Chapter#4: Parity Conditions in International Finance           June 18
                     (Lecture Notes: pages# 32-65)

                                      Responses to Questions# 1-10, Pages# 129-130.
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                      Mini-case page# 123: “Intro of the Porsche 911 Carrera 4S Cabriolet”.
                      Respond to Ques#1-2 on Page#124.

             Included in this chapter:

                  -Geographic Arbitrage
                  -Triangular Arbitrage
                  -Covered Interest Arbitrage
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                  -Purchasing Power Parity
                  - Forward Rate Parity Theory
                  -Real Exchange Rates
                  -The Parity Relationships…..”The Bottom Line!”
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                  Chapter#5: Foreign Exchange Rate Determination and Forecasting
                      (PowerPoint Lecture with slides)

                                         Respond to Questions# 1-14, Pages# 170-1.

                 Included in this chapter:

                  -Asset Market Approach
                  -Disequilibrium in Exchange Rates: Emerging Market Experience
                  -Exchange Rate Regimes
                  - Forecasting Services
              Chapter# 20: International Trade Finance
                   (Lecture Notes: pages# 85-91)

               Included in this chapter:

                          Dealing with Credit Risk
                          Key Documents
                          Trade Financing Options
                          Countertrade




June21-25      Chapters# 1, 2 and 3: Comparative Corporate Governance,




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               The International Monetary System, and Balance of Payments.
                  (Lecture Notes: pages# 94-102)
                           For Chapter#1, responses to Questions#1-17, Pages#29-30.
                    Mini-case page#23: “Failure of Corporate Governance at Enron”.
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                    Mini-case page#59: “The Revaluation of the Chinese Yuan”.
                           For Chapter#3, responses to Questions#1-9, Pages# 94-95.
                    Mini-case page# 91: “Turkey’s Kriz (A): Deteriorating Balance-
                           of Payments”.

Final Exam: July 2, 9:15AM-11:15AM in the same classroom
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