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International Finance
April 2024 Examination
Q1. How FCNR (B) can be termed as a Crucial* Account
for NRI while Transferring any Amount of Sum to their relatives / Family
members in India ? Elaborate the views (10 Marks)
Ans:
Introduction
The
Foreign Currency Non-Resident (FCNR) Bank Account has emerged as a crucial
financial instrument for Non-Resident Indians (NRIs) seeking to transfer funds
to their relatives or family members in India. This specific account assists
NRIs in maintaining their foreign earnings in an assigned foreign currency,
enabling them to secure their money against exchange rate fluctuations.
Established under the regulative framework of the Reserve Bank of India (RBI),
FCNR (B) accounts act as an essential conduit for NRIs to remit funds safely
and successfully to their loved ones in India.
The
financial landscape for NRIs has advanced dramatically, with FCNR (B) accounts
playing a
Q2.
After
closure of Bretton Woods System & Gold Standard at 50 Countries Delegates
the New Currency system emerged at International Finance regime for the
Exchange Rate. This is post Fixed Exchange Rate & Gold Standard. Enumerate
exchange rate and describe which of the exchange rate system operates in the
current scenario? (10 Marks)
Ans:
Introduction
The
closure of the Bretton Woods System and the Gold Standard noted a zero hour in
the background of international finance. These systems, created to stabilize
currencies and facilitate the international profession, encountered significant
obstacles, bringing about their ultimate death. The Bretton Woods System,
established in 1944, pegged significant currencies to the value of gold and the
U.S. buck, offering security and predictability in exchange rates. However,
economic pressures, such as the rising cost of living in the USA and
professional imbalances among countries, rendered the system unsustainable. As
a result, the gold standard was deserted,
3a)
What
is the Cruciality of Current Account in BOP – Balance of Payment as Fundamental
aspect of International Trade & Finance, why it can stand out as most
different and Preliminary? (5 Marks)
Ans:
Introduction:
In
international profession and finance, the Balance of Payments (BOP) is an
extensive record of a country's economic purchases with the remainder of the
world over a specific period. It comprises the present, resources, and
financial accounts, each playing a pivotal role in mirroring a nation's economic
health and communications in the worldwide market.
The
current account, a vital part of the BOP, delineates the circulation of goods,
solutions,
3b)
Elaborate
as how IRP (Interest Rate Parity) forms the crucial significance in Foreign
Exchange Rate Determination as a repercussion of Global Interest Rate
co-ordination to respective 2 pairs of International Currencies Exchange Rate (5 Marks)
Ans:
Introduction
Interest
Rate Parity (IRP) is a fundamental concept in international finance crucial in
figuring out foreign exchange rates between various currencies. It establishes
a connection between interest, the rising cost of living, and exchange rates,
adding significantly to the international financial system's security and
predictability.
IRP
is founded on the no-arbitrage concept, suggesting that investors cannot make
risk-free profits by using differences in interest rates between two countries
in an effective market. In
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