International Financial management
Q.1 Answer the following questions:
(a) Define exposure, differentiating between accounting and economic exposure.
(b) Describe at least three circumstances under which economic exposure is likely to exist.
(c ) Of What relevance are the International Fisher effect and purchasing power panty to you answer to parts (a) and (b)
(d) What is exchange risk as disinter form exposure?
Q.2 The principal problem in analyzing different form of export financing is the distribution of risk between the exporter and the importer. Analyze the following export financing instruments in this respect:
- Confirmed revocable letter of credit
- Confirmed irrevocable letter of credit
- Open account credit
- Time draft D/A
- Cash in advance
Q.3 (a) What risks confront dealers in the foreign exchange market?
(b) an investor wishes to buy French spot (at $ 0.1080) and sell French francs forward for 180 days (at $ 0.1086)
Q.4 Today’s high interest rates put a premium on careful management of cash and marketable securities.
(a) What techniques are available to an MNC with operating subsidiaries in many countries to economize on these short term assets?
(b) What acre the advantages and disadvantages of centralizing the cash management function?
(c ) What can the firm do to enhance the advantages and reduce the disadvantages described in part (b) ?
Q.5 The experiences of fixed exchange rate systems and target zone arrangements have not been entirely satisfactory.
(a) What lessons can be drawn form the breakdown of the Breton woods system?
(b) What lessons can be draws form the exchange rate experiences of the European Monetary system?
Q.1 (a) The international economy is fast Turing into a borderless global village. Critically examine.
(b) What is the impact of devaluation on foreign investment? How is foreign direct investment different form imitational capital movements in general?
Q.2 (a) Explain the functions and role of the world Bank IDA and IFC. How do they differ form each other?
(b) How effective has the regulation of international financial system been? Discuss with suitable examples.
Q.3 what are the various kinds of foreign exchange exposures? If you are a finance manager of an India software Multinational Company how would you measure the possible translation exposure, if Re. devalues by 5% against $
Q.4 what is a political risk? How is it forecasted? Do you think management of political risk is very crucial for successful foreign direct investment decision? If yes how? Given some examples of recent political risks in the India context.
Q.5 (a) What are important techniques of exposure management which may be internally adopted by a multinational firm?
(b) Spot U.K £/Rs. is 1£ = Rs.68.90 day sincerest rates in Indiana and U.K money markets are 10% and 6% respectively. What is the expected £/Rupee 90 days forward rate?
Q.6 (a) In which countries or currencies would you like to retain a higher proportion of your earnings for reinvestment? Explain with reasons
(b) Write a brief note highlighting special problems of developing countries in financing foreign trade. Also indicate possible ways out.
Q.7 What is the difference between foreign direct investment and portfolio investment? To what extent is the building up of separate investment strategies justified by such difference?
Q.1(a) What is the primary goal of multinational companies? Why is stockholder’s wealth maximisation more important than profit maximisation?
(b) Who do volatile exchange rates exist?
Q.2 (a) A country’s current account balance is equal to its private savings surplus minus its government budget deficit. Assume that a country has a current account surplus of $ 10,000 a government budget deficit of $1500 and private savings of $12,000. what is the country private investment? Is the country saving more or less than is needed to finance its private investment and budget deficit?
(b) Most developing countries have incurred huge balance of payments deficits for many years. What alternatives are available to these countries for dealing with their balance of payments problems?
Q.3 (a) Discuss some causes of deviations form purchasing power parity.
(b) The exchange rate for Japanese Yen is $0.0069 per years and a call option has a strike price of $0.0065. an investor has two call options. If the investor exercises, the call options how much profit would be realized.
Q.4 (a) What is the basic purpose of economic exposure management?
(b) A.U.S Company has a singly wholly owned affiliate in Japan. This affiliate has exposed assets of Y500 million and exposed liabilities of Y 800 Million. The exchange rate appreciates form Y 150 per dollar to Y 100 per dollar.
- what is the amount fo net exposure?
- What is the amount of the transaction gain or loss
Q.5 (a) What is the role of a factor in foreign trade? How can a factor aid an exporter?
(b) What are bills of lading and how do they facilitate trade financing?
Q.6 (a) Explain the theory of comparative advantage as a motive for foreign trade. What is the logic behind third- theory?
(b) Comment on the flow of foreign direct investment in India since 1991.
Q.7 (a) Explain the globalisation of financial markets.
(b) Why has the Euro-currency market grown so rapidly?
Q.1(a) Identify the factors which are to be taken into consideration by the countries, which see to make use of foreign capital on their terms.
(b) The international economy is fast turning into a borderless global economy. Critically analyse in relation to international financial System.
Q.2 Prepare a Balance of Payment (BoP) Statement with the following data. Show clearly, sub-balance such as trade balance. Current account balance and capital account balance etc. in the statement.
(a) UFL Ltd. of USA invests in India. Rs.30, 00,000 to modernize its Indian Subsidiary.
(b) A tourist form South Africa buys souvenir worth Rs. 30,000 to carry with him. He also paid hotel and travel bills of Rs. 50,000 to a travel agency.
( c) UFL Ltd. remitted Rs. 50,000 as dividends to its parent company in USA.
(d) The Indian subsidiary of UFL Ltd. sold a part of its production in other Asia countries for Rs. 10,00,000. UFL also borrowed Rs. 20,00,000 to be paid in 6 month) form the British money market for meeting it immediate liquidity needs.
(e) An Indian company buys a machine for Rs. 10,00,000 form Germany. 60% of the payment is made immediately and the balance to be made after 3 years.
(f) An Indian subsidiary of French company borrowed Rs. 5,00,000 form the Indian Public to invest for the modernization.
Q.3 (a) What do you mean by Foreign Exchange Market? Discuss the role played by the main participants in this market.
(b) Explain briefly and illustrate with an example the chain method of marking out cross rates.
Q.4 Explain the need for foreign exchange exposure management. Discuss the various external exposure management techniques thistle used to manage the exchange risk.
Q.5 (a) Define Letter of Credit ‘ explain the explain the various forms of Letters of Credit. Which one is more popular and Why?
(b) Explain briefly the different types of policies offered by she Export Credit Guarantee to provide cover for shimmers made on a short term credit.
Q.6 (a) In the absence fo a common currency throughout the would a series of problems arise n International case management. What are these problems? How can these problems be overcome?
(b) Explain the need for and the advantages of centralized cashmere managements for a company which is involve in imitational business.
Q.7 An export company want to raise capital form international market. what are the basic considerations the firm should take into account while making this international financing decision? Explain.
Q.1 (a) What are the major benefits arising out of Antinationalization of financial system?
(b) What are the major challenges which the finance manages in developing countries are facing while taking decision with respect to foreign business?
Q.2 Critically examine Purchasing Power Parity Theory with the help of suitable examples.
Q.3 The nature and magnitude of foreign exchange exposure depends on the market segment in which a form operates. Comment on this statement with suitable examples. What are the important elements of a currency risk sharing agreement?
Q.4 (a) Briefly discuss the various types of short term capital flow.
(b) All hedging is speculation but all speculation is no hedging Discuss.
Q.5 What is the geographical location of foreign exchange market? Discuss in brief factions of major players in the foreign exchange market.
Q.6 An alterative to investing in foreign stocks is to invest in the shares of domestic MNCs. Discuss. Are MNCs likely to provide a reasonable substitute for intimation portfolio investment?
Q.7 Discuss in brief any four of the following :
(a) Netting and Matching
(b) Leasing and Lagging
( c) Objective and function of IMF
(d) forward Hedge
(e) comparative cost theory of intonations Trade
(f) Unique features of International Bond Market
Q.1 (a) Cost of Capital is irrelevant for MNCs” Discuss.
(b) What is the impact of devaluation f foreign investments? Discuss.
Q.2 Elaborate the economic problems which various kinds of imbalances in imitational flows could create. Also discuss the measures to correct such imbalances.
Q.3 The changing international financial system poses new challenges for financial managers in developing countries. Elaborate.
Q.4 (a) Explain the relationship between forward and spot Exchange rate.
(b) Briefly explain the present Indian Exchange Rate system.
Q.5 Define foreign exchange risk exposure and explain different types of exchange rate exposures
Q.6 Compare and Contrast the following
(a) Netting and Matching
(b) Leading and Lagging
(c ) Discounting and lagging
(d) Documentary Bills and Latter of Credit
Q.7 Explain in detail the basic considerations involved in intimation financing decisions.
Q.8 What do you understand by Portfolio investment? Explain the various strategies usually employed for portfolio investment.
Q.9 Explain in detail the evolution of international financial structure.
Q.10 What do you understand by fixed exchange rate system and the following exchange rate system? Discuss the various optional presently available under these system?
Q.11 Describe the different kinds of international financial flow and explain their significant for a developing country.
Q.12 Explain interest rate parity and describe the reasons for deviation form interest rate parity relationship.
Q.13 Write short notes on the following :
(a) Currency futures
(b) currency options
(c ) Currency swaps
Q.14 Discuss the objective of raising of resources form international markets. Also compare ADR, GDR and ECBs.
Q.15 Distinguish between
(a) Revocable and irrevocable letter of credit
(b) Confirmed and Unconfirmed latter of credit
( c) D/A Bills and D/P Bill s
(d) Supplier credit and Buyers credit
Q.16 What type of risks are present in a portfolio? Which risk remains after the portfolio has been diversified? Explain.
Q.1 (a) What do you understand by a multinational enterprise (MNE)?
(b) How do MNEs use the technique of transfer pricing?
Q.2 (a) What should be the forward rate so as to avoid arbitrage gain with the following data:
Spot exchange rate: Euro 0.90 = US $1
Euro: 3.5% p.a.
US dollar: 4.5% p.a.
(b) Given the following data, find the price of US dollar in terms fo French francs:
Rs. 6.60 = FF
Rs. 43.50 = US $1
Q.3 (a) What is purchasing power parity (PPP)?
(b) What is likely depreciation of the rupee against dollar if the rate of information in India is 8% p.a. and in USA 3% p.a.?
Q.4 Explain the following with suitable examples:
(a) Currency risk sharing agreement:
( c) Factoring.
Q.5 What do you understand by
(a) confirmed irrevocable without recourse letter of credit;
(b) Centralised Cash Management (CCM) in international context.
Q.6 Enumerate different strategies of foreign direct investment. Discuss in detail with suitable examples, the strategy based on exploiting a technological lead.
Q.1 (a) Explain environmental constraints that confect with the primary goal of multinational companies.
(b) What are special Drawing Rights? How are the value Special drawing right centerlines?
Q.2 (a) A county has a merchandise trade surplus of $ 5,000 a unicameral transfer surplus of $ 1,000 and a current account deficit of $ 4000. what is the service trade balance?
(b) If a country has deficit on its current account what are the county’s balance o payments on the capital account? Assume that the country parities a flexible exchange rate system.
(c ) What are the three mayor components of the current account of the balance of payments?
Q.3(a) What are the major problems of economic exposure management? Discuss.
(b) for the coming years a Ceriman subsidiary of an American compare is expected to eat an after tax profit of DM 25 million. Its depreciation charge is stimuli at DM 5 million. The exchange rate is expected to rise form DM 2.00 per dollar to DM 1.5 per dollar for the next year.
(i) What is the postorbital gain or loss?
(ii) if the anticipates business activity were to says the same for the next three years, what would be the total economic gain or loss for chat period.
Q.4 (a) what is a Bankers’ Acceptance? Discuss its advantages as an export financing instrument.
(b) Discuss the role of the export import Bank of India.
( c) What are the advantages and disadvantages of joint ventures?
Q.5(a) Discuss the reasons for the recent grown of Foreign Direct Investment in the third world countries.
(b) The theory of precut life cycle is used as a motive for foreign trace as well as for foreign investment. Discuss this theory as a motive for both foreign trade and foreign investment.
Q.5 (a) How has technology effects the globalisation of financial markets?
(b) common on the objectives and working of the international Monetary fund (MF)?
Q.1(a) Compare and contrast. Comparative Advantage Theory with the comparative cost. Theory of international trade.
(b) Regional trade blocks are a challenge to free trade and WTO,’ Discuss.
Q.2(a) Explain with the help of an imaginary illustration, how capital budgeting decisions of any MNC may be different form domestic firms.
(b) Explain with the help of an imaginary illustration, how capital budgeting decisions of any MNC may be different form domestic firms.
Q.3 (a) Briefly explain different methods of exchange rate forecasting. Discuss their suitability in the Indian context.
(b) Spot and forward exchange rates are based on interest rate parity theorem. Discuss with suitable example.
Q.4 (a) Define foreign exchange risk exposure, distinguish between accounting and economic exposures.
(b) What are important elements of a currency risk sharing agreement? Discuss with suitable example.
Q.5(a) Spot US $/Rs. is $1 = Rs. 46.3 months interest rates in India and US money markets are 9% and 5% respectively. What is the expected $/Rupee 3 month forward rate?
(b) Explain the salient features of the regulations over foreign exchange in India.
Q.6 (a) What is systematic risk? Can it be reduced by international diversification?
(b) It is said Euro is here to stay comment. What implications would Euro have on Indian Corporate in the years to come?
Q.1 Explain the concept of balance of payment (BoP) and discuss the different account of BoP. Can a country run a current account deficit (Surplus) indefinitely? Give reasons
Q.2 Distinguish between pre-shipment and post-shipment financing. Discus the procedure followed by the commercial banks in this regard.
Q.3 Distinguish between ‘Foreign Direct Investment (FDI) and Portfolio Investment and discuss strategies of Portfolio investment.
Q.4 What do you understand by foreign exchange risk? What are the different external exposure management landaus which are used by importers and Exporters?
Q.5 (a) Briefly discuss the Centralized Cash Management system and its advantages.
(b) What do you understand by special drawing Rights (SDRs)? Discuss its significance in International Finance.
Q.6 (a) How are inflation rarest and foreign exchange rates into-related? Illustrate with the heap of an example
(b) Differentiate between Accounting Exposure and Economic Exposure. Discuss the principal translation methods of Foreign Subsidiaries Accounts.
Q.7 Write short notes on any four of the following
(a) Irrevocable confirmed letter of credit
(b) Syndicated euro currency loan market
( c) Transfer pricing
(d) International Development. Association (IDA)
(e) Foreign Currency Accounts of non resident Indians
Q.1 (a) In what respect have the changes in the global financial market made the task of a finance comparative advantage theory’ Comment..
(b) Comparative cost theory is an extension of comparative advantage theory Comment.
Q.2 (a) what is systematic risk? Can it be hedged by international diversification? Explain.
(b) Distinguish between euro bond issue and foreign bond issue.
Q.3 (a) centralised cash management is a double edged weapon for international working capital management. Working capital management Discuss with the help of examples.
(b) Distinguish between terms of payment and types of credit.
Q.4 (a) What are the important elements of a currency risk sharing agreement?
(b) Briefly discuss the principal elements of an exposure management information system suitable for a Mumbai based Indian exporter.
Q.5 (a) Spot and forward exchange rats are based o interest rate parity theorem. Discuss with suitable examples.
(b) Distinguish between accounting and economic exposure.
Q.6 (a) Sometimes it is said that the intimation financial system is an extension of domestic financial systems. Do you agree? Explain giving reasons.
(b) Describe the innovations in the international capita markets.
Q.7 Discuss in brief and four of the following:
(a) Strategies for portfolio investment
(b) Documentary credit and exchange control restrictions
( c) Lending programmes fo EXIM bank
(d) Internal techniques for exposure management
(e) PPP theory
(d) India’s BOP – Past Trends