Model

Questions
Subject: International business
&Finance (Revised) Class: M.Com (I)
Q#1
A put option on Australian dollars with a strike
price of $0.80 is purchased by a speculator for
a premium 0f $0.02 per unit. If the Australian
dollars spot rate is $0.74 at the time the
option is exercised, should the speculator
exercise the option on this date or let the
option expire? What is the net profit per unit to
the speculator? What is the net profit per unit
to the seller of this option?
Q#2
Explain advantages and disadvantages of
strategic alliances.
Q#3
(a)-Define the following:
1. Forward contract

2. Futures contract
3. Call option
4. Put option
Q#4
Briefly explain transaction exposure, Economic
exposure, and translation exposure.
Q#5
Randy purchased a call option on British
pounds with a strike price of $1.45 and for a
premium 0f $0.02 per unit. Assume there are
31,250 units of British pound in this option
contract. If the spot rate is $1.46 at the time
the option is exercised, what is Randy, s net
profit on this option?
Q#6
Explain the following theories of international
trade:
1. Heckscher-Ohlin theory
2. The product cycle theory

3. National competitive advantage

Q#7
Briefly explain:
1. FDI
2. Horizontal FDI
3. Vertical FDI
4. Green field investment
5. Backward vertical FDI
6. Forward vertical FDI
Q#8
Explain the following theories of international
trade:
1. Mercantilism
2. Absolute advantage theory
3. Comparative advantage theory
Q#9
(a)-Define the following:

1. Options
2. American option
3. European option
4. Option premium
Q#10
Assume the following information:
Spot rate of =$1.60
180-day forward rate of =$1.56
180-day British interest rate =4%
180-day US interest rate =3%
Is there any arbitrage opportunity, if yes, what
arbitragers will do?
Q#11
What is Importance of international finance?
Also explain the role of financial manager in
international finance.
Q#12
Define globalization. what are drivers of
globalization?

Q#13
A call option on Canadian dollars with a strike
price of $0.60 is purchased by a speculator for
a premium 0f $0.06 per unit. Assume there are
50,000 units in this option contract. If the
Canadian dollars spot rate is $0.65 at the time
the option is exercised, what is the net profit
per unit and for one contract to the speculator?
What would the spot rate need to be at the
time the option is exercised for the speculator
to break-even? What is the net profit per unit
to the seller of this option?
Q#14
Briefly explain the following:
1. Payment methods for international trade
2. Trade finance methods
3. Bill of exchange(draft)
4. Bill of lading
Q#15
Explain the theory of purchasing power
parity(ppp).based on this theory, what is a

general forecast of the values of currencies in

countries with high inflation?
Q#16
Assume the annual interest rate in united state
is 4% and in France is 6%
1. According to IRP, what should be forward
rate premium or discount of euro?
2. If the euros spot rate is $0.10, what should
be the one year forward rate of the euro?
Q#17
How an MNC can reduce exposure to host
government takeovers?
Q#18
What is regional economic integration? Discuss
levels of economic integration.
Q#19
Explain the instrument of trade Policy?
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