MF0015 & INTERNATIONAL FINANCIAL MANAGEMENT

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DRIVE SUMMER 2016
PROGRAM Master of Business Administration- MBA
SEMESTER 4
SUBJECT CODE &
NAME
MF0015 & INTERNATIONAL FINANCIAL MANAGEMENT


1 Explain Globalization, Advantages of Globalization and Disadvantages of Globalization.
Explanation of globalization
Advantages of Globalization
Disadvantages of Globalization

Answer: Globalization can be defined as the process of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other aspects of culture. It includes the spread and connectedness of communication, technologies and production across the world and involves the interlacing of cultural and economic activity. The


2 In foreign exchange market many types of transactions take place. Discuss the meaning and role of forward, future and options market.
Forward market
Future
options

Answer: Forward Market
In the forward market, contracts are made to buy and sell currencies for future delivery, say, after a fortnight, one month, two months and so on. The rate of exchange for the transaction is agreed upon on the very day the deal is finalized. The rate of exchange for the transaction is agreed upon on the very day the deal is finalized. The forward rates with varying maturity are quoted in the newspapers and those rates form the basis of the contract. Both parties have to abide by the

3 Explain Swap, its features and types of Swap.
Explanation of Swap
Explanation on features of swap
Types of swap

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


4 Explain in detail the types of exposure and measuring economic exposure
Explanation on types of exposure
Explanation on measuring economic exposure

Answer: Types of exposure
Economic Exposure
The potential changes in all future cash flows of a firm resulting from unanticipated changes in the exchange rates are referred to as economic exposure. The monetary assets and liabilities, in addition to the future cash flows, get influenced by the changes in foreign exchange rates. Of all


5 Elaborate on the tools of foreign exchange risk management and techniques of exposure management.
Explanation of the tools of foreign exchange risk management
Explanation on the techniques of exposure management

Answer: Tools of Foreign Exchange Risk Management
Forward contracts: A forward contract is a non-standardized contract that takes place between two parties

6 Write short note on:
a. Adjusted present value model (APV model)
b. Economic and political risk

Answer: Adjusted Present Value Model
Debt has an advantage over equity since the interest paid on debt is almost always deductible from income while calculating corporate taxes, which is not the case for dividends on equity. So, the post cost of debt is less than the pretax cost of debt. Debt creates additional value for a project. How is this so? By reducing the taxes paid, so adjustments to the calculation of the project’s present value

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