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COMSATS Institute of Information Technology

Abbottabad
DEPARTMENT OF MANAGEMENT SCIENCES



Course Plan Semester Spring 2014 (BBA-8 A)

Course Code: MGT 433 Courser Teacher: Zaheer Swati
Course Title: Financial Institutions Office Room # : A 369
Email: Zaheerswati@ciit.net.pk
Total Credit Hours 3 Lectures Credit Hours 3


Pre-requisite: Basic Finance and Financial Management


Course Description and Objective:

This course examines the form and function of various financial markets and the manner in
which financial institutions seek to use these markets to accomplish strategic corporate
objectives. The attention will be given on the behavior of major financial institutions, including
banking and non-banking financial institutions and their role in the intermediation process as
suppliers of funds to the money and capital markets. Course also analyzes the role of financial
institutions in allocating resources and managing risk. Furthermore, the course examines how
financial institutions trade various financial claims within the capital market to tailor their risk-
return profile in order to enhance capital value. Special attention is given to the role of central
banks in influencing interest rates.



Required Readings & Text Books:
1. (ME) Financial Markets and Institutions (5th Edition) by Frederic S. Mishkin and
Stanley G. Eakins (Pearson Education)
2. (SC) Financial Markets and Institutions , A Modern Perspective (International
Edition) by Anthony Saunders & Marcia Millon Cornett

Reference Books:
1. Money and Capital Markets (6th Edition) by Peter S. Rose.
2. Banking Currency and Finance by Prof. M. Saeed Nasir.
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Course Outline and Contents:
Week 1
Introduction :
SC Ch. 1 & ME Ch.1
Why Study Financial Markets & Institutions? Overview
1. Primary vs Secondary Markets
2. Money vs Capital Markets
3. Overview of Financial Institution
4. Globalization of Financial Markets and Institutions

Week 2
Determinants of Interest Rates
SC Ch.2 & ME Ch.3
Interest Rate Fundamentals
1. The distinction between real and nominal interest rates,
2. The distinction between interest rates and returns
3. Time Value of Money and Interest Rates

Week 3-4
Interest rates and Security Valuation:
SC Ch.2 &ME Ch. 4-6:
1. Why interest rates change?
2. Determinants of asset demand,
3. Supply and demand in the bond market,
4. Efficient market hypothesis and Return Risk Tradeoff

Week 5-6
Security Markets
SC Ch.5 &ME Ch. 11:
The Money Markets
1. The purpose of money markets,
2. Money market securities/instruments:
3. Treasury bills, NCDs (Negotiable Certificates of Deposits),
4. Commercial Papers,
5. International Instruments:
a. Eurodollars Certificates of deposits/ Eurodollars Accounts,
b. Repurchase Agreement,
c. Federal funds,
6. Comparing money market securities

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Week 6-7 The Capital Market Securities
SC Ch.6 & ME Ch. 12:
1. The bond market,
2. Types of bonds
a. Treasury bonds,
b. Municipal bonds,
c. Corporate bonds,
i. Types of corporate bonds,
3. Bond Yield Calculations and Finding the value of Coupon bonds

Week 7 The Stock Market
SC Ch.8 & ME Ch. 13:
1. Investing in Stocks,
2. Computing the price of common stocks and preferred stocks,
3. The Regulation of the stock market (Securities and Exchange Commission
of Pakistan)

Week 7-8 The Mortgage Markets
SC Ch.7 & ME Ch. 14:
1. Characteristics of the residential mortgage:
2. Mortgage interest rates,
3. Loan terms and Mortgage loan amortization,
4. Types of mortgage loans

Week 8 Derivative Security Markets
SC Ch.10
1. Corporate created securities: Rights, Warrants and Convertibles, Investors
created securities:
2. Option Contracts:
a. Put Options,
b. Call Options
c. Future Contracts
Week 9 The Foreign Exchange Market
SC Ch.9 ME Ch. 15
1. Foreign Exchange markets & Rates

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2. Exchange rates in the long run,
3. Exchange rates in the short run,
4. Changes in exchange rates

Week 10 International Monetary System
ME Ch. 16:
1. Flexible/Floating exchange rate,
2. International Monetary Institutions,
a. IMF, World Bank,
b. Asian Development Bank (ADB),
c. Islamic Development Bank
d. Multinational Corporations (MNCs)

Week 11 Commercial Banking Industry:
SC Ch. 12: ME Ch. 17:
1. Structure and Competition, Historical Development of the Banking System,
2. Role and functions of commercial banking,
3. Separation of banking and other financial service industries,
4. International banking

Week 12 Central Banking and Conduct of Monetary Policy:
ME Ch. 9:
1. Structure of central banks,
2. Functions of a central bank,
3. Monetary policy,
4. Exchange rate policy
5. State Bank of Pakistan (SBP) (Special Reading)

Week 13 Other Financial Institutions:
SC Ch. 15: & ME Ch. 21:
Insurance companies
1. Role of insurance companies,
2. Fundamental of insurance,

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3. Growth and organization of insurance companies,
4. Types of insurance

Week 14
Securities Firms and Investment Banks
SC Ch. 16: & ME Ch. 22:
1. Securities, Brokers and Dealers,
2. Regulation of securities firms,
3. Stock Exchange and Stock Market Indicators

Week 15 Investment Banks:
SC Ch. 16: & ME Ch. 22:
1. Role and functions of investment banks,
2. How investment banks sell securities and diversify the risk?

Week 16 The Mutual Fund Industry
SC Ch. 18: & ME Ch. 20:
1. Mutual fund structure,
2. Investment objective classes,
3. Regulations of Mutual funds and Hedge funds

Week 17 Pensions Funds
SC Ch. 19: & ME Ch. 21:
1. Types Of Pensions
2. Regulation of pension plans
3. The future of pension funds