MF0017 - MERCHANT BANKING AND FINANCIAL SERVICES

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ASSIGNMENT

DRIVE WINETR	2013
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	MF0017 - MERCHANT BANKING AND FINANCIAL SERVICES
SEMESTER	4
BK ID	B1815
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

1 Rating methodology is used by the major Indian credit rating agencies. Explain the main factors of that are analyzed in detail by the credit rating agencies.

Answer : A Credit Rating issued by a credit rating agency is an assessment of the credit worthiness of individual financial securities (For example, a bond) and debt issued by corporations, government issued securities or even a country’s ability to repay debt.

Credit Ratings are assigned by rating agencies to companies and debt instruments, are designed to gauge the likelihood that a company will default on its obligations to creditors. Thus, they give investors a rough idea of the risk associated with

2 Give the meaning of the concept of venture capital funds. Explain the features of venture capital fund.

Answer : Venture Capital Funding can be of different kinds. Early stage funding could be at the stage of ideation, initial production and marketing. Expansion funding is done during commercial production, marketing and growth (For more information refer to the article – Stages of Venture Capital Funding). Different funds focus on different types of funding and sectors. There are however some unifying characteristics of venture capital

3 Hire purchase is one of the important concept. There are certain features of hire purchase agreement so explain the points of it. Differentiate between hire purchase and leasing.

Answer : Meaning and characteristics of hire purchase finance :

A method of buying goods through making installment payments over time. The term hire purchase originated in the U.K., and is similar to what are called "rent-to-own" arrangements in the United States. Under a hire purchase contract, the buyer is leasing the goods and does not obtain ownership until the full amount of the contract is paid. The characteristics of hire-purchase system are as under

• Hire-purchase is a credit purchase.
• The price under hire-purchase system is
•  

4 Explain the concept of Swap. Write down its features and various types of interest rate swap.

Answer : Introduction of Swap :

In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward). Foreign Exchange Swap allows sums of a certain currency to be used to fund charges designated in another currency without acquiring foreign exchange risk.

A foreign exchange swap consists of two legs:

• a spot foreign exchange transaction, and
• a forward foreign exchange transaction.

5 Elaborate on measuring exchange rate movements. Explain the factors that influence exchange rates.

Answer : Measuring exchange rate movement:

Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures. But exchange rates matter on a smaller scale as well: they impact the real return of an investor's portfolio. Here we look at some of the major forces behind exchange rate movements. Numerous factors determine

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