MF0015 - INTERNATIONAL FINANCIAL MANAGEMENT

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ASSIGNMENT

DRIVE	FALL 2014
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	MF0015 - INTERNATIONAL FINANCIAL MANAGEMENT
SEMESTER	4
BK ID	B1759
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 Write short notes on:

a) Measuring exchange rate movements

Answer : Measuring the exchange rate

Exchange rates are expressed in various ways:

Spot Exchange Rate - the spot rate is the rate for a currency at today’s market prices

Forward Exchange Rate - a forward rate involves the delivery of currency at a specified time in the future at an agreed rate. Companies wanting to reduce risks from exchange rate volatility can buy their currency ‘forward’ on the market

2 The key component of the financial system is the money market that acts as a fulcrum of monetary operations.

Write down the important points under each category mentioned below.

a) Functions performed by money market

Answer : There are two types of financial markets viz., the money market and the capital market. The money market in that part of a financial market which deals in the borrowing and lending of short term loans generally for a period of less than or equal to 365 days. It is a mechanism to clear short term monetary transactions in an economy.

Money market is an important part of the

b) International interest rates

Answer : In many industrial countries the domestic impact of interest rate developments abroad has become an increasingly sensitive question. Outside the United States the issue has centred on the possible influence of high or rising interest rates on a still fragile economic recovery. When inflation expectations are unknown, interest rate levels are, of course, difficult to interpret, and partly for this reason interest rates have come to play a smaller role as explicit objectives of monetary policy. In some - though not all - countries nominal interest rates are nevertheless felt to be uncomfortably high in relation to rates of inflation. Moreover,

c) Standardized Global Market regulations.

Answer : The financial crisis of 2007 revealed fundamental weaknesses in the structure of financial regulation. In response, policymakers and regulators have embarked on an ambitious regulatory reform agenda that aims to achieve as much global co-ordination and consistency between regional reform efforts as possible.

How successful attempts at

3 Thousands of years back the concept of bartering between parties was prevalent, when the concept of money had not evolved. Explain  counter trade with examples

Answer :  Trading between nations has been happening since time began. In ancient time nations traded silk, spices, cloth and animals of all kinds. Today nation trade food items, defense equipment, metals, electronics etc. The products might have changed but the basic concept is still the same as the underlining need which brings together two nations in a trade relationship still exists.

One such method of trading between nations is

4 There are different techniques of exposure management. One is the Managing Transaction Exposure and the other one is the managing operating exposure So you have to explain on both Managing Transaction Exposure and Managing Operating Exposure.

Answer : ‘Transaction Exposure’ is a risk which is faced by the organizations which are involved in international trade especially when they enter into the financial obligations. The risk which is faced by the companies is about the changes occurring in the currency exchange rates after they have entered into trade obligations in the international market. Many companies which face such a situation adopt hedging strategy which

5 Every firm is going on concern, whether domestic or MNC. Explain the techniques of capital budgeting and the steps to determine cash flows.

Answer : Capital investments are long-term investments in which the assets involved have useful lives of multiple years. For example, constructing a new production facility and investing in machinery and equipment are capital investments. Capital budgeting is a method of estimating the financial viability of a capital investment over the life of the investment.

6 Write short note on:

American Depository Receipts(ADR)

Answer : An American Depository Receipt, or ADR, is a security issued by a U.S. depository bank to domestic buyers as a substitute for direct ownership of stock in foreign companies. An ADR can represent one or more shares, or a fraction of a share, of a non-U.S. company. Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADSs).

Global Depository Receipts(GDR)

Answer : Global Depositary Receipts (GDRs) are negotiable certificates issued by depositary banks which represent ownership of a given number of a company’s shares which can be listed and traded independently from the underlying shares. These instruments are typically used by companies from emerging markets and marketed to professional investors only.

Dear students get fully solved assignments

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