FIN 401 – INTERNATIONAL FINANCIAL MANAGEMENT

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ASSIGNMENT

DRIVE	SPRING  2019
PROGRAM	MASTER OF BUSINESS ADMINISTRATION - MBA
SEMESTER	SEMESTER 4(FINANCE)
SUBJECT CODE &NAME	FIN 401 – INTERNATIONAL FINANCIAL MANAGEMENT
BKID	B1759
CREDITS	4
MARKS	4 CREDIT, 30 MARKS EACH SET

Set -1

Ques. 1. The balance of payment statement summarizes the Economic transactions of a country’s residents in relation to the rest of the world.  

Answer : Meaning of Balance of Payment Account:

A Balance of Payment Account is a systematic record of all economic transactions between residents of a country and the rest of the world carried out in a specific period of time.

Briefly put, ‘Balance of Payment Account is a summary of international transactions of a country for a given period’ (i.e., financial year). It records a country’s transactions with the rest of the world involving inflow and outflow of foreign exchange. In short BOP Account is a summary statement of transactions in foreign exchange in a year.

Ques. 2. In Forward market, contracts are made to buy and sell currencies for future delivery.  

Answer : A forward contract binds two parties to exchange an asset in the future and at an agreed upon price. Hence, the agreed upon price is the delivery price or forward price.

Forward contracts are not standard; the quantity and quality of the asset are specific to the deal. While forward contract sounds really official because the word "contract" is in the title, it's not always a sure thing.

Ques. 3. Explain the various aspects that needs to be considered in order to decide the sources of Funds.

Answer :  There are a number of ways to finance a business and a range of lenders and investors to choose from when a business owner is making financing decisions. Financing can come in the form of debt or investment, and the terms of the financing can vary significantly between the two. Important factors to consider when choosing

Set -2

Ques. 1. There are various financial instruments that are used by companies in India and abroad in order to hedge the exchange risk   

Answer : The foreign exchange market includes all the different transactions of currency exchange. It consists of selling domestic currency to buy foreign money at a certain value or rate, usually defined by supply and demand.

Eventual movements in the exchange rate are a risk for investors and businesses with international operations. Therefore, they adopt strategies to minimize the impact of eventual adverse movements. This is known as hedging, and it

Ques. 2. Corporate financial decisions include exchange rate forecasts as one of the most important inputs.  

Answer : Exchange rate fluctuations affect not only multinationals and large corporations, but also small and medium-sized enterprises. Therefore, understanding and managing exchange rate risk is an important subject for business owners and investors.

There are various kinds of exposure and related techniques for measuring the exposure. Of all the exposures, economic exposure is the most important one and it can be calculated statistically.

Ques. 3. A depository receipt is a financial instrument whereby investors in one country can buy, hold or sell the securities issued by companies in another country.

a) ADR (American Depository Receipt)

Answer : American Depository Receipt (ADR) is a certified negotiable instrument issued by an American bank suggesting the number of shares of a foreign company that can be traded in U.S. financial markets.

American Depository Receipts provide US investors with an opportunity to trade in shares of a foreign company. When the ADRs did not exist, it

b) GDR (Global Depository Receipt)

Answer : Global Depository Receipt (GDR) is an instrument in which a company located in domestic country issues one or more of its shares or convertibles bonds outside the domestic country. In GDR, an overseas depository bank i.e. bank outside the domestic territory of a company, issues shares of the company to residents outside the

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