MF0016 - TREASURY MANAGEMENT

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ASSIGNMENT

DRIVE	SUMMER 2014
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	MF0016-TREASURY MANAGEMENT
SEMESTER	4
BK ID	B1814
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.

Q.1 Collateralised Borrowing and Lending Obligations (CBLO) is a product in the money market launched in 2003 by CCIL. Discuss the process involved in obtaining membership of CCIL for CBLO.

Ans : Process involved in obtaining membership of CCIL for CBLO:

“Collateralized Borrowing and Lending Obligation (CBLO)", as the name implies is a fully collateralized and secured instrument for borrowing / lending money. CBLO as a product is conceived and developed by CCIL for the facilitating deployment in a collateralized environment. As a product, CBLO aims to benefit those entities who have been phased out of Call/ Notice money market and / or those entities on restrictions have been placed on the borrowing / lending in call / notice money market. CBLO Dealing system is hosted and

Q.2 Commodities market is the market in which commodities like oil, gold and agricultural products are traded. Who are the players in the commodity market? How does the commodities move?

Players in commodity market:

Investors in the commodities market fall into the following categories:

1. Hedgers :

Hedgers enter into commodity contracts to be assured access to a commodity, or the ability to sell it, at a guaranteed price. They use futures to protect

Q.3 Suppose you are the manager of a company operating in three countries; India, US and UK. What are the risks you face relating to foreign exchange?

Ans: Foreign exchange risk factors:

While the FOREX (Foreign Exchange Market) is an incredibly lucrative venture for many investors, it is also a risky market that requires some knowledge and skill to navigate. Without the proper foreknowledge, it is possible to lose everything in a single bad venture, or to lose money over time through a series of poor investments. Knowledge is built up over time, and learning how to assess the risks associated with the FOREX can make the difference between losing and earning money.               

Q.4 Explain interest rate and various types and various sources of interest rate.

Ans: Different types of interest rate risks:

Interest Rate Risk:

It is the risk which arises due to the uncertainty of future interest rates. It arises due to the difference between the timings of rate changes & the timings of cash flows. (Such risk arises because there is a possibility that when the cash is received, there may be a difference in the prevailing rate of interest and the one agreed upon at the start of the contract) Such changes in interest rate can affect the investments inversely and can be reduced

Q.5 The Treasury function of a company plays a key role in working capital. Analyse the interface between treasury and working capital.

Ans : Interface between treasury and working capital:

Treasury management is central to corporate finance in practice. Even in smaller businesses, where no formalised treasury function exists, the main treasury activities of managing corporate funding, risk, banking relationships, liquidity and working capital will still be conducted. This chapter has introduced the reader to those treasury activities, but most of them receive extensive treatment in subsequent chapters.

Q.6 Treasury products are the product in the market available to the treasury for raising and deploying funds for investment and trading in securities and forex markets.

Ans: Forex services:

High growth Indian economy coupled with globalisation has resulted in thousands of Indians going abroad for travel, studies and business. Simultaneously, there is a huge inflow of foreign tourists visiting India on vocation and business. This has resulted in the need for a reliable and quality service provider for purchase and sale of Foreign Exchange.

Each one of them requires reliable, affordable and

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