INSTITUTE of BUSINESS MANAGEMENT

College of Business Management

Financial Institutions FIN 301

Faculty:
Course Outline
Objective:
The course focuses on the study of financial markets and institutions. The primary objective of
this course is to help students obtain a better understanding of key financial products, institutions
and issues currently prevailing the global economy.
To aid this understanding, economic tools and concepts will be developed to help students
organize their thinking about financial assets and markets, and about the varied roles of key
financial market participants. Real-world events will be heavily relied on for concrete
illustration. Examples include: the recent (and still ongoing) global financial crisis; the
controversial role of the International Monetary Fund (IMF) in the global economy; and
historical comparisons of previous financial crises to the current financial crisis.
In particular, students will be expected to study assigned textbook chapters. Finance 7 Business
section of the newspaper would be discussed in each class. At least twenty five percent of each
test (midterm exams and final exam) will relate to these key in-class discussion questions and the
points raised in the accompanying class discussions. The intention is to have the class
discussions elaborate and expand upon the assigned readings.
Intended Learning Outcomes:
a. Knowledge and understanding:
Students should be able to:

Understand the concept of money in detail.

Understand the characteristics of different kinds of near monies available.
Understand the definition and features of bonds
Understand, what are bills and how to calculate the yield of a bill
Understand the differences between financial and non-financial wealth
Understand the concept of portfolio of assets and how a portfolio minimizes risk
Understand different kinds of risks associated with financial markets
Understand the relationship between consumption, saving and investment
Understand the factors which should be taken into consideration while making an
investment decision
Understand how interest rates changes are effected by supply and demand of loans

b.

Understand the effect on interest rates when inflation rises

Understand the working mechanism of different financial intermediaries and their basic
functions
Understand the responsibility and functions of a central bank in detail and how they
carry out their activities with other financial institutions
Understand all the products and facilities which a commercial bank offers to its
individual and business customers
Understand functions and role of MFIs in the development of the economy and
different MFIs which exist in Pakistan
Understand the types of financial markets and the participants who plays in such
markets
Understand different types of money markets instruments and their basic features
Understand the advantages of investing in a money market instrument
Understand the meaning of commonly used terms in stock markets, how they operate
and what factors causes the rise and fall of stock markets
Understand how the foreign exchange market operates, who are the major participants
and what are the financial instruments available

Intellectual skills

c.

Professional and practical skills.through experiential learning

d.

Analysis: can analyze with guidance using given classifications/principles

Synthesis: can collect and categorize ideas and information in a predictable and standard
format
Evaluation: can evaluate the reliability of data using defined techniques and/or tutor
guidance
Application: can apply given tools/methods accurately and carefully to a well defined
problem and begin to appreciate the complexity of the issues

Application of skills: can operate in predictable, defined contexts that require use of a
specified range of standard techniques
Autonomy in skill use: is able to act with limited autonomy, under direction or
supervision, within defined guidelines
Students will be able to take calculated investment decisions as financial managers of
an organization through the experiential based learning term project as well as classroom
experiential exercises.

General and transferable skills

Group working: can work effectively with others as a member of a group and meet obligations
to others (for example, tutors, peers, and colleagues)
Learning resources: can work within an appropriate ethos and can use and access a range of
learning resources
Self evaluation: can evaluate own strengths and weakness within criteria largely set by others
Management of information: can manage information, collect appropriate data from a range
of sources and undertake simple research tasks with external guidance
Autonomy: can take responsibility for own learning with appropriate support

Session
1

Communications: can communicate effectively in a format appropriate to the discipline(s) and

report practical procedures in a clear and concise manner
Problem solving: can apply given tools/methods accurately and carefully to a well defined
problem and begins to appreciate the complexity of the issues in the discipline

Topic / Learning outcome/ Methodology

Class and course introduction
General Introduction to Financial Institutions

2,3 & 4

Topic/ Course contents: Money

To economists, the word money has a different meaning from income or wealth.
Money is anything that is generally accepted as payment for goods or services or
in the repayment of debts. In this chapter, we include the following topics:
Approaches to define money
Functions of Money
Characteristics of Money
Types of Money
Near Monies including Govt Bonds, Credit Cards, debit Cards, Bonds
Issued by Private Companies
T-Bills
Common Shares & Preference Shares
Learning Outcomes:
1.
2.
3.
4.

Define the concept on money in detail

Explain the characteristics of near monies
Identify near monies in Pakistan
Discuss the working of near monies in the world and Pakistan
5. Describe the definition of money given by State Bank of Pakistan

Methodology
Lecture, discussion, real world examples
Source:
Chapter 2 - Money, Banking & Financial Markets by Fredric Mishkin
Chapter 2 - Money, Banking & Financial Markets by Robert D. Auerbach
5, 6 & 7

Topic/ Course contents: Other Financial Assets

Financial risk is an umbrella term for multiple types of risk associated with
financing, including financial transactions that include company loans in risk of
default. Risk is a term often used to imply downside risk, meaning the uncertainty

of a return and the potential for financial loss.

The topics for discussion include:
Bonds
Financial & Non-Financial Assets
Portfolio of Assets
Kinds of Risks Associated with Financial Markets
Learning Outcomes:
1.
2.
3.
4.

Define bonds and their features

Explain bills and yield of bills
Identify the difference between financial and non financial wealth
Discuss the concept of portfolio of assets
5. Describe kinds of risks associated with financial markets

Methodology
Lecture, class discussion, real world examples
Source: Chapter 3- Money, Banking & Financial Markets by Fredric Mishkin
Chapter 3 - Money, Banking & Financial Markets by Robert D. Auerbach
8, 9 & 10

Topic/ Course contents: Interest Rates

The yield to maturity, which is the measure that most accurately describes interest
rates, is the interest rate that equates the present value of future payments of a
debt instrument with its value today. This chapter deals with the following
contents:
Importance of Interest Rates
Saving & Investment
Factors that effect investment decision
Types of Risks
The Demand and Supply of Loanable Funds
The Effect of Inflationary expectations of Interest Rates
Comparison of interest rates in Pakistan to the rest of world
Effect of interest rates on investment and economic activity
Causes and effects of change in discount rate
Learning Outcomes:
1. Define interest rates
2. Explain the relationship between consumption, saving and investment
3. Identify the factors which should be taken into consideration while making an
investment decision
4. Discuss how interest rate changes are effected by supply and demand of loans
5. Describe the relationship between interest rate and inflation

Methodology
Lecture, class discussion, real world examples
Source: Chapter 4 - Money, Banking & Financial Markets by Fredric Mishkin
Chapter 3 - Money, Banking & Financial Markets by Robert D. Auerbach
11
12, 13 & 14

Mid Term
Topic/ Course contents: Financial Intermediaries
The basic function of financial markets is to channel funds from savers who have
excess funds to spenders who have shortage of funds. In this chapter we include
the following topics:
Ways in which capital can be transferred from saver to investor
Types of financial intermediaries
Functions of financial intermediaries
Learning Outcomes:
1.
2.
3.
4.

Define financial intermediaries

Explain different financial intermediaries and their basic functions
Identify ways in which capital can be transferred from saver to investor
Discuss role of financial intermediaries in any economy specially Pakistan
5. Describe products and services offered by financial intermediaries

Intended Learning Outcomes

After the completion of these sessions the students would be able to:
a) Understand the working mechanism of different financial intermediaries
and their basic functions
Methodology
Lecture, class discussion, real world examples
Source: Chapter 3 - Money, Banking & Financial Markets by Fredric Mishkin
15 & 16

Topic/ Course contents: Central Bank

A central bank, reserve bank, or monetary authority is a public institution that
manages a state's currency, money supply, and interest rates. Central banks also
usually oversee the commercial banking system of their respective countries. In
contrast to a commercial bank, a central bank possesses a monopoly on increasing
the nation's monetary base, and usually also prints the national currency, which
usually serves as the nation's legal tender.
The topics for discussion includes:
Functions of Central Bank
Difference Between Finance Ministry and Central Bank

Monetary policy and its role in a countrys economic development

Learning Outcomes:
1.
2.
3.
4.

Define functions of central bank

Explain difference between finance ministry and central bank
Identify the responsibilities of a central bank
Discuss the monetary policy and its impact in countrys economic development
5. Describe the relationship between central bank and financial intermediaries

Methodology
Lecture, class discussion, real world examples
Source: Chapter 2 - Money and Banking in Pakistan by S.A. Meenai & Javed A.
Ansari
Chapter 10 - Money and Banking in Pakistan by S.A. Meenai & Javed A.
Ansari
17 & 18

Topic/ Course contents: Commercial Banks

A commercial bank (or business bank) is a type of retail bank that provides
services, such as accepting deposits, giving business loans and basic investment
products. Commercial bank being the financial institution performs diverse types
of functions. It satisfies the financial needs of the sectors such as agriculture,
industry, trade, communication, etc. That means they play very significant role in
a process of economic social needs. The functions performed by banks are
changing according to change in time and recently they are becoming customer
centric and widening their functions. The topics for discussion include:

Facilities offered to individual consumers & business consumers

Role and importance of commercial banks in the world
Commercial banks in Pakistan

Learning Outcomes:
1.
2.
3.
4.

Define commercial banks

Explain the operations of commercial banks
Identify role of commercial banks in Pakistan
Discuss products and facilities which a commercial bank offers to its

individual and business customers

5. Describe the relationship between central bank and commercial bank
Methodology
Lecture, class discussion, real world examples
Source: Chapter 3 - Money and Banking in Pakistan by S.A. Meenai & Javed A.

Ansari
19

Topic/ Course contents: Multilateral Financial Institutions

A multilateral development bank (MDB) is an institution, created by a group of
countries, that provides financing and professional advising for the purpose of
development. MDBs have large memberships including both developed donor
countries and developing borrower countries. MDBs finance projects in the form
of long-term loans at market rates, very-long-term loans (also known as credits)
below market rates, and through grants.
The topics for discussion include:
Functions of MFI
Role of MFI in the development
MFI in Pakistan
Learning Outcomes:
1.
2.
3.
4.

Define Multilateral financial institutions

Explain functions of MFIs
Identify types of MFIs
Discuss role of MFIs in the development of the economy
5. Describe role of MFIs in Pakistan

Methodology
Lecture, class discussion, real world examples
Source: Chapter 12 Money, Banking and Financial Markets by Fredric Mishkin
20
21

Second Mid Term

Topic/ Course contents: Financial Markets in Pakistan:
A financial market is a market in which people and entities can trade financial
securities, commodities, and other fungible items of value at low transaction costs
and at prices that reflect supply and demand. The topics for discussion include:

Category of Financial Markets

Participants of Financial Markets
Importance of financial markets
How financial markets are operating in Pakistan

Learning Outcomes:
1.
2.
3.
4.

Define categories of financial markets

Explain importance of financial markets
Identify participants of financial markets
Discuss role of financial markets in Pakistan

5. Describe products and facilities offered by financial markets

Methodology
Lecture, class discussion, real world examples
Source: Chapter 12 Money, Banking & Financial Markets by Robert D.
Auerbach
22

Topic/ Course contents: Money Markets

As money became a commodity, the money market became a component of the
financial markets for assets involved in short-term borrowing, lending, buying
and selling with original maturities of one year or less. The topics for discussion
include:

Types of Money Market Instruments

Advantages of Money Market Instruments
Characteristics of Money Market Instruments
Money market in Pakistan

Learning Outcomes:
1.
2.
3.
4.

Define money market

Explain types of money market instruments and their features
Identify advantages of investing in money market instruments
Discuss characteristics of money market instruments
5. Describe role of money market in Pakistan

Methodology
Lecture, class discussion, real world examples
Source: Chapter 7 Money& Banking in Pakistan by S.A. Meenai & Javed A.
Ansari
23

Topic/ Course contents: Stock Markets

A stock market or equity market is a public entity (a loose network of economic
transactions, not a physical facility or discrete entity) for the trading of company
stock (shares) and derivatives at an agreed price; these are securities listed on a
stock exchange as well as those only traded privately. The following topics would
be discussed:

Terms Used in Stock Exchanges

International Stock Exchanges
Stock Exchanges in Pakistan
Role of stock exchange in the economy of a country

Learning Outcomes:
1.
2.
3.
4.

Define stock market

Explain terms used in stock exchange
Identify international stock exchanges
Discuss role of stock exchange in an economy and how they operate
5. Describe factors which effect the stock exchange

Methodology
Lecture, class discussion, real world examples
Source: Chapter 7 Money& Banking in Pakistan by S.A. Meenai & Javed A.
Ansari
24

Topic/ Course contents: Bond Markets

The bond market (also known as the credit, or fixed income market) is a financial
market where participants can issue new debt, known as the primary market, or
buy and sell debt securities, known as the Secondary market, usually in the form
of bonds. The primary goal of the bond market is to provide a mechanism for
long term funding of public and private expenditures. The following topics would
be discussed:
Importance and role of bond market
Participants of bond market
Bond prices and interest rates
Bond market in Pakistan
Learning Outcomes:
1.
2.
3.
4.

Define bond market

Explain importance and role of bond marker
Identify participants of bond market
Discuss bond prices, yield and interest rates
5. Describe role of bond market in an economy

Methodology
Lecture, class discussion, real world examples
Sources: Financial System & Economic Development Pakistan Shakil Farooqui
25, 26

Topic/ Course contents: Foreign Exchange Markets:

Foreign exchange rates are important because they affect the cost of goods sold
abroad and the cost of foreign goods bought domestically. The chapter includes
the following contents:

Market size and liquidity

Market participants

Trading characteristics

Determinants of FX Rates

Algorithmic trading in foreign exchange

Financial instruments

Speculation

Currency fluctuations causes and effects

Learning Outcomes:
1.
2.
3.
4.

Define foreign exchange market

Explain determinants of FX rates
Identify market participants and trading characteristics
Discuss speculation and factors causing currency fluctuations
5. Describe financial instruments

Methodology
Lecture, class discussion, real world examples
Source: Chapter 21 Money, Banking and Financial Markets by Fredric Mishkin
27

Topic/ Course contents: Euro Market

The Euro market is a large single market comprised of all member countries, allowing for more
efficient trade and the centralization of monetary policy through the ECB. The Euro market is
considered a major finance source for international trade, through the money market or euro
currency, euro credit and euro bonds.

The session would include what is euro market, how it operates and how it is
doing in the present time
Learning Outcomes:
1.
2.
3.
4.

Define euro market

Explain the need for creating euro market
Identify participants of euro market
Discuss current euro crisis
5. Describe the relationship between euro and participants economic stability

Intended Learning Outcomes

Methodology
Lecture, class discussion, real world examples
Source: Most recent authorized publication by a reputed author
28
29 & 30

TERM PRESENTATIONS
FINAL
Students will be tested on their conceptual and applicative grasp of ALL the
principles taught. The three hour test should be prepared focusing sharply on
the learning outcomes detailed above in section a, b and c of this curriculum
read together with the learning outcomes identified in each of the significant
sessions above, with a special focus on the learning outcomes of sessions

Teaching and learning methods

The course is highly interactive between the class and the instructor. Through case
studies/presentations, problems, and specific experiential class room activities, students will have
the opportunity to use the concepts, ideas, and strategies presented in class. Problem-solving
sessions occur in both individual (primarily) and team (occasionally) settings.
This introductory undergraduate course will incorporate a lecture and project-based approach.
The textbook used in this course will be used as a reference point for the discussion(s). Students
are encouraged to read and inculcate the major principles found in the textbook.
Lectures, professional academic illustrative videos, class discussions, home exercises and
quizzes, case studies, presentations and a term project. Case studies will be selected to develop
specific, actionable skills and are not intended to be vehicles for endless discussions and
opinions. The lectures are designed to reinforce and expand upon, not to substitute for, what
students learn from the assigned readings and study.
The students are required to read business newspaper daily so that the major news can be
discussed in each class. The discussion and the reading would help the students in relating the
theory learnt during the course to the real world
Assessment for marking
Assessment
methods
1 Quizzes
2 Assignments

to access
Knowledge, understanding
&reinforce class learning concepts.
Knowledge ,understanding &

Assessment
schedule: week:
3, 5, 8
3 - 13

Weight
age
10%
10%

reinforce class learning concepts

3 Case discussions Intellectual and analytical skills
4 1st Mid Term
test
5 2nd Mid Term
test
6 Research term
report
7 Final exam

Throughout the
semester
6

5%

Professional skills& subject

knowledge
Professional and practical skills

11

15%

14

5%

Professional skills &subject

knowledge.

16

40%

Knowledge and understanding

15%

Rubric for marking

Attribute

Conceptual
Understanding
60%
Structure
20%

Language
20%

Grade
A
Demonstrates a
clear and deep
understanding
of the theory.

Grade
B
Demonstrates
clear
understanding
of the ideas
presented in
the theory.

Grade
C
Demonstrates
limited/surfac
e
understanding
of the theory.

Grade
D
Demonstrates
a superficial
understanding
of the theory.

Particularly clear
ideas with logical
transitions
throughout

Consistent focus
and
good transitions

Paragraph flow
and
transitions are
adequate

Weak
paragraph
structure and
illogical
transitions

Lack of focus

Language
especially
clear and concise
with flawless
mechanics.

Free of errors in
mechanics.
Clear
and concise
language

Minor errors in
mechanics.
Sentences could
be
more effective

Fundamental
mechanics
errors. Lack of
clarity and
concision

Serious errors
in
mechanics.
Lack on
clarity and
concision.

Facilities required for teaching and learning

PC with printer with instructor
Classroom multimedia with full sound system
Classroom overhead projector
Panoramic whiteboard across front class wall
Access to a corporation for the term research project
Essential Reading:
1) The Economics of Money, Banking & Financial Markets by Mishkin
2) Money and Banking in Pakistan by S.A. Meenai & Javed A. Ansari
Recommended Reading:
1) Financial Institutions and Markets by Jeff Medura (7th edition)
2) Money, Banking & Financial Markets by Robert D. Auerbach

Grade
F
Lack of
understanding
and effort to
understand the
theoretical
concepts

3) Financial System & Economic Development Pakistan Shakil Farooqui

4) Handouts on selected topics
Facilities required for teaching and learning
PC with printer with instructor
Classroom multimedia with full sound system
Classroom overhead projector
Panoramic whiteboard across front class wall
Access to a corporation for the term research project

Room #
E-mail:
Approved by Head of Department
Semester-Long Experiential Learning Project
An effective way to help students learn about financial institutions is the hypothetical investment in
different financial institutions. This project is designed to accomplish such a task.
The class will be divided into groups (five students maximum per group), each group will investment in
different products of different financial institutions. Each group is asked to make an investment of

Rs. 20 million in financial products for the duration of 1 year. The objective of the project is to
teach the students how to invest in the most lucrative ways in various financial institutions and
financial products which are discussed during the course. They are also taught how to develop an
investment portfolio while taking not only return into consideration but also risks attached to it.
Thus, the aim was to make a portfolio with highest possible return while hedging the risk the
students were asked to make a portfolio while taking the following markets into consideration:
-

Equity & Debt Market

Capital & Money Market

Each submission will be reviewed and presented with suggested areas for improvement, for more detailed
study in future courses.
At the end of the semester, each group is to present their entire investment plan to the class.