BF2207 International Finance

Academic Year

2015-16

Semester

: 1

Instructor(s)

: Dr. Siriwan
Chutikamoltham for
Seminars on Monday,
Tuesday, Wednesday
2:30 -6:30 pm

:
Course
Coordinator
:

Pre-requisites
:
No. of Aus

AB0901 Principles of Economics: A Singapore Perspective

AB1201 Financial Management*
4

:
* All students (especially students who were exempted from taking AB1201 Financial
Management) should review the AB1201 Financial Management material before attending the
BF2207 International Finance course.
Course Description and Scope
Many companies engage in cross-border business and they face important financial questions beyond
those found in a purely domestic setting. This course aims to provide the basic understanding and
tools to evaluate, finance, and manage international business. The issues and tools discuss are
particularly relevant to highly open economies, such as Singapore, where companies will engage in
international business.
In this course, we will describe the global financial markets that facilitate international business and
explain the key economic linkages among them. In the context of international finance,
understanding foreign exchange rates is crucial. We will therefore explain exchange rates and those
factors that affect the rates. We will then examine the challenges for companies created by
unexpected changes in exchange rates. We will also discuss how these firms should manage their
exposure to currency fluctuations. Lastly, we will explore areas of international corporate finance
like capital budgeting and financing from the perspective of multinational companies.
The recent financial crisis and other contemporary global financial issues will also be explored.
Course Learning Objectives
Students will learn how to analyse and make managerial decisions in the context of a multinational
firm.

Learning & Teaching Methods

This course commences in Week 1 and ends in Week 14. It offers weekly seminar of 4-hour duration,
per the class schedule below.
Course Assessments
Components

Marks

Individual / Group

C1: Assignments

10

Individual

C2: Participations & Presentations

10

Individual / Group

C3: Projects

10

Individual / Group

C4: Quizzes

15

Individual

Final examination #

55

Individual

Coursework *

Total

100

* Details will be covered in the first day of class.

#

The final examination is a restricted open book exam where students may bring into the exam
hall one A4-size sheet of paper with information on mathematical formulas, computation steps,
etc. The sheet may be written on both sides, but it has to be prepared by the student individually.
No downloading, copying, shrinking, imaging from another source is allowed. The intent of the
final examination is to determine how well you understand the basic principles and tools of
International Finance, and if you are able to apply them to novel as well as routine situations.

Assessment Plan
Course Learning Objective

Assessment Method

Knowledge Acquisition
Students should demonstrate knowledge and
application ability of core curriculum such as
assessing, quantifying and managing exchange
rate exposures of companies.

Case discussions.
Assignment discussions and project
presentations.
Problem sets and quizzes that cover
various topics in the core curriculum.
Written examination.

Teamwork & Interpersonal Skills

Students should develop abilities to interact and
cooperate effectively with others in the conduct
of business.

Assignment discussions and project

presentations.

Reference
B

Adrian Buckley
Financial Crisis: Causes, Context and Consequences
Pearson Prentice Hall, 2011
(ISBN: 027373511X / Call No.: XX(1107178.1) e-book)
http://catalogue.pearsoned.co.uk/educator/product/Financial-Crisis-Causes-Contextand-Consequences/9780273735113.page

M* Jeff Madura
International Financial Management, 12th Edition
Cengage Learning
http://www.cengage.com/search/productOverview.do?
Ntt=287383784139518751820925278281857137&N=16+4294922239&Ntk=P_EPI
(Note that you can purchase just the e-book or e-book plus a hard copy of the
Technological version. The latter option is recommended because you will have a big
portion of the full text book in hard copy for only $5 more.
Furthermore the publisher offers a Buddy Deal promotion for NTU students in the
coming Semester 1. This promotion is valid at the campus bookshop Booklink NTU
only.
CTE International Financial Management with CB CourseSmart eBook 12th
Edition
Jeff Madura
ISBN-13: 9789814617758 | ISBN-10: 981461775X
2015 | Published | 12th Edition | 480 Pages
List price: $74.00 before GST
Student price: $59.000 including GST (Buddy Deal Promotion $10.00 off each
book for the purchase of 2 same books)
* The primary textbook used for this course.
Course Instructor(s)
Instructor

Office

Phone

E-mail

Siriwan Chutikamoltham

S3-B1B-66

6790 5001

siriwan@ntu.edu.sg

Proposed Weekly Schedule

Week
(Week
beginning)

1
11 Aug*

2
17 Aug

3
24 Aug

Topic

Introduction to
International
Finance

The International
Monetary System

Foreign Exchange
Markets

Learning Objectives

1. To identify management goal and

organizational structure of a
Multinational Corporation
(MNC).
2. To describe the key theories that
justify international business.
3. To explain the common methods
used to conduct international
business.
4. To describe a model for valuing a
MNC.
1. To explain the key components of
the balance of payments.
2. To explain how international trade
flows are influenced by economic
factors and other factors.
3. To explain how international
capital flows are influenced by
country characteristics.
4. To describe the agencies that
facilitate the international flow of
funds.
1. To describe the background and
corporate use of the foreign
exchange market, international
money market, international
credit market, international bond
market & international stock
markets.

Readings to be
done before class
& Assignments
(due in the
following class,
unless specified
otherwise)

M Chapter 1

M Chapter 2
Assignment 1
Blades Case Ch.1
(M page 2829)
Question 1 & 2.
Blades Case Ch.2
(M page 5960)
Question 1, 2 & 3.
M Chapter 3
Assignment 2
FX Markets &
Transaction
Question 1 to 6.
(Questions will be
posted)

Week
(Week
beginning)

4
31 Aug

5
7 Sep

Topic

Determination of
Exchange Rate

Determination of
Exchange Rate
(cont)

Learning Objectives

1. To explain how the equilibrium

exchange rate is determined.
2. To describe factors that determine
the equilibrium exchange rate.
3. To explain how financial
institutions attempt to capitalize
on anticipated exchange rate
movements.
4. To describe the exchange rate
system used by various
governments.
5. To explain how governments can
use direct intervention to
influence exchange rates.
6. To explain how government
intervention in the foreign
exchange market can affect
economic conditions.
7. To explain the conditions that will
result in various forms of
international arbitrage and the
realignments that will occur in
response.
8. To explain the concept of interest
rate parity.
9. To explain the variation in
forward rate premiums across
maturities and over time.
10. To explain the purchasing power
parity (PPP) theory and its
implications for exchange rate
changes.
11. To explain the International
Fisher effect (IFE) theory and its
implications for exchange rate
changes.

Readings to be
done before class
& Assignments
(due in the
following class,
unless specified
otherwise)

M Chapter 4, 6, 7,
8
Assignment 3
Blades Case
(M page 132133)
Question 1 to 6.

Week
(Week
beginning)

6.
14 Sep

Topic

Currency
Derivatives**

7.
21 Sep

Exposure
Management

28 Sep

Recess

8.
5 Oct

Exposure
Management
(cont)

Learning Objectives

1. To explain how forward contracts

are used to hedge based on
anticipated exchange rate
movements.
2. To describe how currency futures
contracts are used to speculate or
hedge based on anticipated
exchange rate movements.
3. Explain how currency option
contracts are used to speculate or
hedge based on anticipated
exchange rate movements.
1. To explain how transaction
exposure, economic exposure and
translation exposure can be
measured.
2. To explain the techniques
commonly used to hedge
payables and receivables.
To describe limitations of
hedging.

3. To explain how an MNCs

economic exposure can be
hedged.
4. To explain how an MNCs
translation exposure can be
hedged.

Readings to be
done before class
& Assignments
(due in the
following class,
unless specified
otherwise)

M Chapter 5
Assignment 4
End-of-Chapter
Questions &
Applications
(M page 159165)
Question 4, 12,14,
18 & 25.

M Chapter 1012
Assignment 5
Blades Case
(M page 385386)
Question 1 to 7,
due in Week 8
after the Recess.

Study materials of
Week 1 to 6 (Ch.1
to 8) for midterm
quiz.
Miderm Quiz on
Saturday 10 Oct.
10:30 am to 11:30
am., Lee Kong
Chian Lecture
Theatre, (Block
SS3, SS3-B2-10).

Week
(Week
beginning)

9.
12 Oct

Topic

International
Capital Budgeting

Learning Objectives

1. To describe common motives for

initiating foreign direct
investment
2. To explain the benefits of
international diversification.
3. To explain the capital budgeting
analysis of an MNCs subsidiary
versus its parent.
4. To describe how multinational
capital budgeting can be applied
to determine whether an
international project should be
implemented.
5. To explain how multinational
capital budgeting can be adapted
to account for special situations
such as alternative exchange rate
scenarios or when subsidiary
financing is considered.
6. To explain how the risk of
international projects can be
assessed.

Readings to be
done before class
& Assignments
(due in the
following class,
unless specified
otherwise)

Week
(Week
beginning)

10.
19 Oct

Topic

International
Financing

Learning Objectives

1. To explain how an MNC uses

debt financing to minimize its
exposure to exchange rate risk.
2. To explain how an MNC may
assess potential benefits from
financing with a low-interest rate
currency that differs from its cash
inflow currency.
3. To explain how an MNC may
determine the optimal maturity
when obtaining debt.
4. To explain how an MNC may
decide between using fixed rate
versus floating rate debt.
5. To explain how MNCs determine
whether to use foreign financing.
6. To explain the possible benefits of
financing with a portfolio of
currencies.

Readings to be
done before class
& Assignments
(due in the
following class,
unless specified
otherwise)

M Chapter 1314
Assignment 6
Blades Case
(M page 460462)
Question 1 to 5.

M Chapter 18 &
20
Assignment 7 (due
in Week 13)
11.
26 Oct

International
Financing (cont)

12.
2 Nov.

e-learning
No class meeting

13.
9 Nov.

Financial Crisis
Project
Presentation

End-of-Chapter
Questions &
Applications
(M page 563566)
Question 8 & 20;
(M page 608610)
Question 5 & 10

I will discuss with students in

Seminar 3 for alternatives for 10 Nov
(Deepavali Holiday)
9

Week
(Week
beginning)

14.
16 Nov.

Topic

Learning Objectives

Readings to be
done before class
& Assignments
(due in the
following class,
unless specified
otherwise)

Review Period

*Students in Monday Seminar will not meet for the first class due to National Day Holiday
but they can make up either by studying on their own the lecture material posted or attending
class on Tuesday or Wednesday, Aug. 11 or 12, respectively.
**Derivative pricing is excluded so ignore Appendix 5A and 5B. (Detailed derivative pricing
is covered in the BF2209 Derivative Securities course).

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Academic Integrity Policy

NTUs Student Academic Integrity Policy requires all members of the NTU community to uphold the
values of academic integrity in all academic undertakings. The policy defines the following acts as
academic dishonesty:
plagiarism,
academic fraud and
facilitating academic dishonesty.
All students are expected to read and observe the policy guidelines detailed at this website:
http://academicintegrity.ntu.edu.sg/for-everyone/policy/. The academic integrity website also
highlights the penalties that will be imposed on students who are found to have violated the policy,
and the processes that will be followed when we deal with cases of academic dishonesty.

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