MF0015 - International Financial Management Summer Spring 2012

Spring / February 2012 Master of Business Administration- MBA Semester 4 MF0015 International Financial Management - 4 Credits (Book ID:
: B1316) Assignment Set- 1 (60 Marks) Note: Each Question carries 10 marks. Answer all the questions. Q1. You are given the following information: Spot EUR/USD : 0.7940/0.8007 Spot USD/GBP: 1.8215/1.8240 Three months swap: 25/35 Calculate three month EUR/USD rate. Ans:Forward Points = ((Spot * (1 + (OCR rate * n/360))) / (1 + (BCR rate * n/360))) - Spot OCR = Other Currency Rate BCR = Base Currency Rate Forward points = ((0.07940 * (1 + (0.018215 * 90/360))) / (1 + (0.08007 * 90/360))) 0.07940 SWAP = -0.00120 Forward rate = 0.07940 - 0.00120 = 0.0782 Customer sells EUR 3 Mio against USD at 0.0782 at 3 month (0.07940 - 0.00120). Customer wants to Buy EUR 3 Mio against USD 3 months forward. Dear Students, Get your assignments from Our ESTEEMED ORGANIZATION smumbaassignment.com Just email to kvsude@gmail.com or S M S your email to +91 9995105420. message Format - <E-MAIL ID> Space <Name> To +91 9995105420 , we will reach back you with in 24H
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Q2. Distinguish between Eurobond and foreign bonds. What are the unique characteristics of Eurobond markets? Ans:- A Eurobond is underwritten by an international syndicate of banks and other securities firms, and is sold exclusively in countries other than the country in whose currency the issue is denominated. For example, a bond issued by a U.S. corporation, denominated in U.S. dollars, but sold to investors in Europe and Japan (not to investors in the United States), would be a Eurobond. Eurobonds are issued by multinational corporations, large domestic corporations,
Dear Students, Get your assignments from Our ESTEEMED ORGANIZATION smumbaassignment.com Just email to kvsude@gmail.com or S M S your email to +91 9995105420. message Format - <E-MAIL ID> Space <Name> To +91 9995105420 , we will reach back you with in 24H Or Directly call our Middle East Office +974 55702886 . More Info, Kindly visit smumbaassignment.com or http://smumbaassignments.in Best Regards, Admin smumbaassignment.com
Q3. What is sub-prime lending? Explain the drivers of sub-prime lending? Explain briefly the different exchange rate regime that is prevalent today.
Q4. Explain (a) Parallel Loans (b) Back to- Back loans
Q5. Explain double taxation avoidance agreement in detail
Q6. What do you mean by optimum capital structure? What factors affect cost of capital across nations?
Spring / February 2012 Master of Business Administration- MBA Semester 4 MF0015 International Financial Management - 4 Credits (Book ID: B1316) Assignment Set- 2 (60 Marks) Note: Each Question carries 10 marks. Answer all the questions. Q1. Because of its broad global environment, a number of disciplines (geography, history, political science, etc.) are useful to help explain the conduct of International Business. Elucidate with examples. International Finance is a distinct field of study and certain features set it apart from other fields. The important distinguishing features of international finance are discussed below: Foreign exchange risk: An understanding of foreign exchange risk is essential for managers and investors in the modern day environment of unforeseen changes in foreign exchange rates. In a domestic economy this risk is generally ignored because a single national currency serves as the main medium of exchange within a country. When different national currencies are exchanged for each other, there is a definite risk of volatility in foreign exchange rates. The present International Monetary System set up is characterized by a mix of floating and managed exchange rate policies adopted by each nation keeping in view its interests. In fact, this variability of exchange rates is widely regarded as the most serious international financial problem facing corporate managers and policy makers. Political risk: Another risk that firms may encounter in international finance is political risk. Political risk ranges from the risk of loss (or gain) from unforeseen government actions or other events of a political character such as acts of terrorism to outright expropriation of assets held by foreigners. MNCs must assess the political risk not only in countries where it is currently doing business but also where it expects to establish subsidiaries. The extreme form of political risk is when the sovereign country changes the rules of the game and the affected parties have no alternatives open to them.
Expanded opportunity sets: When firms go global, they also tend to benefit from expanded opportunities which are available now. They can raise funds in capital markets where cost of capital is the lowest. In addition, firms can also gain from greater economies of scale when they operate on a global basis. Market imperfections: The final feature of international finance that distinguishes it from domestic finance is that world markets today are highly imperfect. There are profound differences among nations laws, tax systems, business practices and general cultural environments. Imperfections in the world financial markets tend to restrict the extent to which investors can diversify their portfolio. Though there are risks and costs in coping with these market imperfections, they also offer managers of international firms abundant opportunities.
Q2. What is a credit transaction and a debit transaction? Which are the broad categories of international transactions classified as credits and as debits? Q3. What is cross rates? Explain the two methods of quotations for exchange rates with examples.
Q4. Explain covered and uncovered interest rate arbitrage. Q5. Explain briefly the mechanism of futures trading Q6. Briefly explain the difference between functional currency and reporting currency. Identify the factors that help in selecting an appropriate functional currency that can be used by an organisation.

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Spring / February 2012 Master of Business Administration- MBA Semester 4 MF0015 International Financial Management - 4 Credits (Book ID:

Q5. Explain double taxation avoidance agreement in detail

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