AFC3240: International Finance

Mid-Semester Test - 20%
Group Assignment - 20%
Exam - 60%

This is one of the better finance subjects at Monash in my opinion, and it mostly examines exchange rates and their impact on financial institutions. The first week is pretty much introductory stuff on the relevance of international finance. Week two introduces some exchange rate terminology and standards (probably a recap for most commerce students) and then covers the history of international monetary systems and currency regimes. Week 3 is the influence of the balance of payments on exchange rates, week 4 is a study of the Eurozone crisis and GFC. The next few weeks are then about the determinants of exchange rates in terms of interest rates, inflation etc. - this stuff is largely theory based (purchasing power parity, the fisher effect...) but none of it is particularly difficult; some if it was covered briefly in AFC2000 and I imagine it would be particularly easy for those studying economics. The mid-sem covered the first five weeks and was held the week 8 lecture. The content being tested largely related to the tute questions and was fairly expected. There aren't many calculations in this unit, particularly early in the course, to the extent that there isn't a formula sheet given. The best method of studying for the MST (and the exam) is to know the tute questions well. It's a good idea to go to the tutes for this, as although they aren't marked, solutions aren't generally released (except for calculation questions). You'll want to focus on some theory questions from the book, but also those that relate to the article readings as these are usually tested to an extent.

After the MST it's probably worth starting on the group assignment. This semester it was a 2000 word research essay on the 'carry trade' due at the end of week 10. Groups were self-organised, 3-5 people per group. I recommend using google doc's to write it all up together; research can basically all be done through journal databases (Econlit, ABInform etc.). Having a group essay was a strange piece of assessment I thought, an essay would usually be an individual task. Splitting it up can be a bit of a pain, but it's not too hard, and I thought the topic was interesting.

The lectures from week 9 to 11 cover currency derivatives and their use in firms preventing exchange rate exposure. Currency derivatives is pretty much a re-hash of the stuff you'd do in options in Advanced Corporate Finance. If you've done options then there's probably no need to show up for week 9. This part of the course has more calculations type questions, though there's still theory and practical examples from the readings. If there's an options question you'll get the formula in the exam though, so it's fairly straightforward. Probably the most difficult part of the course is the hedging of foreign currency receivables/payables in week 10-11, and this is usually on the exam. Week 12 was international portfolio finance - simple enough if you've done a few finance subjects (e.g. Equities), this week was only covered on the MCQ section of the exam. The exam this semester was 25 multi choice questions (worth 0.8 marks each, so 20 marks total), and 5 20 mark questions, of which you choose 4 = 80 marks; therefore a total of 100 marks. The multiple choice questions are fairly easy and are largely comprehension stuff - study the slides and the questions. The short answer questions are largely what you'd expect, although one question involved a 14 mark analysis of a certain reading - you'd have to know the readings fairly well to be able to answer that, so I (and a lot of other people) pretty much had to skip that question out of the 5.
Overall, a good unit. Covers a lot of real life examples and doesn't get too bogged down in theory. I took this unit s2 2013, so the lecturer was Elaine Hutson, it may be a bit different in s1 as I believe another lecturer takes it generally. Lectures were good if you went to them (recorded if you couldn't make it), Elaine knows her stuff and doesn't just read off the slides. Tutes, as mentioned, are probably more important though in terms of knowing the getting the answers down, as the mid sem and exam are generally not dissimilar.

Dr Mohan Nandha (First semester)
Assoc Prof Elaine Hutson (Second semester)

One past exam (2012) but without the answers and the MCQ's

4 Out of 5

Yes

Multinational Business Finance 13ed, (Eiteman, Stonehill and Moffett). There will be some tute questions from this book most weeks, so it's worth considering getting a copy. Alternatively you could photocopy pages from a library copy each week. The book itself covers most of the course material, though it isn't really essential reading. Some chapters use different terms and don't cover all the material. In terms of study you'd be better off generally doing the readings (articles are put up weekly on relevant topics), looking over the slides and doing the tutorial questions.

1 x 2hr Lecture
1 x 1hr Tutorial

Semester 2, 2013

TBA