IB0010 & INTERNATIONAL FINANCIAL MANAGEMENT

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DRIVE winter 2016

PROGRAM MBA

SEMESTER III

SUBJECT CODE &

NAME

IB0010 & INTERNATIONAL FINANCIAL MANAGEMENT

1. Explain the difference between International Financial Management and Domestic Financial Management? Discuss the goals of international financial management?

Difference between international financial management and domestic financial management.

Goals of international financial management

Answer: Difference between international financial management and domestic financial management

•         Foreign exchange risks: The foreign exchange risks states the fluctuation or variation in the prices of currency which

•          

2. Explain the advantages and disadvantages of fixed and floating rates systems? Discuss foreign exchange transactions?

Explain advantages and disadvantages of floating rate systems.

Meaning, types

Answer: Advantages of fixed rates system

1. The system provides exchange rates stability by eliminating uncertainty.

2. Volatility of exchange rate is controlled as it insulates the economy from external disturbances.

3. Foreign investors are encouraged to invest in countries without the fear of exchange rate fluctuations.

4. Poorer nations could get foreign exchange for development purposes at low costs.

Disadvantages of fixed rates system

1.                  The system required regular

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

[Introduction of Swap-2

Features of swap-4

Various types of interest rate swap-4]

Answer: Swap is an agreement between two or more parties to exchange sets of cash flows over a period in future. The parties that agree to swap are known as counter parties. It is a combination of a purchase with a simultaneous sale for equal amount but different dates. Swaps are used by corporate houses and banks as an innovating financing instrument that decreases borrowing costs and increases control over other financial

4. Elaborate on meaning of foreign exchange exposure. Explain the types of foreign exposure.

Meaning of foreign exchange exposure

Explain the types of foreign exposure

Answer: The foreign exchange exposure of a firm can be defined as a measure of the sensitivity of its cash flows to changes in exchange rates. Due to the difficulty of measuring cash flows, exposure is examined by most of the researchers through the study of how a firm’s market value responds to the changes in the exchange rates. The value of a currency in a floating exchange-rate regime changes frequently and

5. Write short notes on:

International Credit Markets

International Bond Markets

[International Credit Markets-5

International Bond Markets-5]

Answer: a) International Credit Markets

International credit markets are the forum where companies and governments can obtain credit (loans in various forms) from the creditors/investors. These markets are an important part of international capital markets. International capital market is that financial market or world financial centre where shares, bonds, debentures, currencies, mutual funds and other long term securities are purchased and sold. These markets provide the opportunity for international companies and investors to deal in shares and bonds of different companies from various countries. Syndicated Loans: Syndicated loans are credits granted by a group of banks, c

6. Country risk is the risk of investing in a country, where a change in the business environment adversely affects the profit or the value of the assets in a specific country. Explain the country risk factors and assessment of risk factors.

[Introduction of country risk factors-5

Explanation of assessment of risk factors-5]

Answer: Country Risk Factors

We can define country risk as the risk of losing money due to changes that can occur in a country’s government or regulatory environment. The most common examples are acts of war, civil wars, terrorism and military coups, etc. It comes in various forms: for example, change in the government of a country, a new president or prime minister, some new laws, a ruling party becoming minority, and so on. Such changes do impact

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