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DRIVE-SPRING 2014
PROGRAM-MBADS (SEM
4/SEM 6)
MBAFLEX/ MBAN2 (SEM
4) PGDFMN (SEM 2)
SUBJECT CODE &
NAME-MF0015 & INTERNATIONAL FINANCIAL MANAGEMENT
BK ID-B1759
CREDIT & MARKS-4
Credits, 60 marks
Q1 Write short
notes on:
a) Measuring
exchange rate movements
b) Factors that
influence exchange rates
(Measuring exchange
rate movements, Factors that influence exchange rates)5,5
Answer.
a) Measuring
exchange rate movements
The movement of exchange rates is
the result of the combined effect of a number of factors that are constantly at
play. Economic factors, also called fundamentals, are better guides as to how a
currency moves in the long run. Short-term changes are affected by a multitude
of factors which may also have to be examined carefully. Changes in
Q2 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
b) International
interest rates
c) Standardized
Global Market regulations.
(Explanation of
important points of functions performed by money market, Explanation of
international interest rates, Explanation of standardized global market
regulations)3,3,4
Answer.
a) Functions
performed by money market
There are three broad functions that
are performed by the money market.
1. For the demand and supply of
short term funds, the money market provides an equilibrating mechanism.
Q3 Thousands of
years back the concept of bartering between parties was prevalent, when the
concept of money had not evolved. Explain on counter trade with examples
(Introduction of
counter trade, Explanation of Different forms of counter trade, Examples)3,5,2
Answer.
Counter trade
When the concept of money had not
evolved. A person could give say 100 bags of wheat and get wood or coal, a certain
quantity for cooking. These bartering contracts were between individuals or
small kingdoms. Bartering exists today also but at different level. For
example, Iran may give 100 million barrels of oil to France and get 5000 guns
of certain type in exchange. We can say that bartering is exchange of goods
between parties as per agreed terms without the use of money.
Q4 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.
(Explanation of
Managing transaction exposure, Explanation of Managing operating exposure )5,5
Answer.
Managing
transaction exposure
Transaction
exposure calculates gains or losses which occur after the current financial
compulsions according to terms of reference are resolved. Taken that the deal
would lead to a future inflow or outflow of foreign currency cash, any
unprecedented alterations in rate of exchange amid the period in which
transaction is entered and the time taken for it to settle in cash would guide
to a change in worth of net flow of cash in terms of the home currency.
Q5 Every firm is
going on concern, whether domestic or MNC. Explain the techniques of capital
budgeting and the steps to determine cash flows.
(Explanation of
techniques of capital budgeting-NPV, IRR , PI , Payback period, Determination
of cash flow)5,5
Answer.
Techniques of
capital budgeting-NPV, IRR , PI , Payback period
There are many techniques which
can be used to analyze the projects. These techniques can be broadly classified
into discounted cash flow techniques, which include net present value (NPV),
internal rate of return (IRR), profitability index (PI) and discounted payback
methods, and non-discounted cash flow techniques which include payback and
accounting rate of return (ARR) methods. The most commonly and most widely
accepted technique is NPV method.
Q6 Write short note
on:
a)
American Depository Receipts(ADR)
b)
Global Depository Receipts(GDR)
(Explanation of ADR,
Explanation of GDR) 5, 5
Answer.
American
Depository Receipts(ADR)
It represents ownership in the
shares of a non-US company and trades in the American stock markets. ADRs
enable American investors to buy shares in foreign company without any issue of
cross-border and cross-currency transactions. ADRs carry price in American
dollar, pay dividend in the same currency and can be traded like any
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