Saturday, 26 July 2014

mf0016 smu mba summer 2014 IVth sem assignment

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DRIVE SUMMER 2014

PROGRAM/SEMESTER MBADS (SEM 4/SEM 6) MBAFLEX/ MBAN2 (SEM 4) PGDFMN (SEM 2)
SUBJECT CODE & NAME- MF0016- TREASURY MANAGEMENT

Q1 Collateralized Borrowing and Lending Obligations (CBLO) is a product in the money market
Launched in 2003 by CCIL. Discuss the process involved in obtaining membership of CCIL for CBLO.
(Process involved in obtaining CBLO) 10 marks

Answer.
Process involved in obtaining CBLO

CBLO is a repo used in international markets. The third party guarantees the return of funds from the borrower on the specified date. The third party sells the securities in the market to repay the funds to lender. In most of the repo transactions, both the borrower and lender can’t unwind the deal before the due date. In

Q2 Commodities market is the market in which commodities like oil, gold and agricultural products are traded. Who are the players in the commodity market? How does the
commodities move?
(Players, Factors that affect the commodity market)4, 1*6
Answer.
Players in the commodity market

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Hedgers and arbitrageurs – The group includes production, processing or merchandising of a commodity. Commercials do the bulk of trading in commodity markets.

Q3 Suppose you are the manager of a company operating in three countries; India, US and UK.
What are the risks you face relating to foreign exchange?
(Foreign exchange risk factors) 10
Answer.
Foreign exchange risk factors

Classifying business risks into the domains in which they occur is a good way to assign responsibility for managing them. The bigger the domain, the higher is the risk factor. For instance a company in consulting services will have no inventory risks but sizeable market and competitor risk. Companies that deal in

Q4 Explain interest rate and various types and various sources of interest rate.
(Different types of interest rate risks, framework for measuring and managing the liquidity risks.)5,5
Answer.

Types  of interest rate risks
In particular many hedging techniques that were not open to managers of corporate treasuries and were the prerogative of financial institutions are now increasingly used by large corporations sitting on huge cash balances. These include options, futures and cross-border derivative instruments.


Q5 The Treasury function of a company plays a key role in working capital. Analyse the interface between treasury and working capital.
(Interface between treasury and working capital) 10
Answer.

Interface between treasury and working capital

The interface between treasury and working capital management can be seen in the following aspects.

1. Cash balance, a significant component of working capital, is entirely in the hands of Treasury. As we have seen above, deciding the optimum cash balance and maintaining the actual balance at that level is a key requirement of good working capital management. Especially when cash is held in foreign currencies this

Q6 Treasury products are the product in the market available to the treasury for raising and
deploying funds for investment and trading in securities and forex markets.
(Forex services, Money products, securities) 3,3,4
Answer.
Forex services

Forex is a market where currencies of various countries are traded. It is the most liquid market as free currencies such as USD, EURO and other currencies are instantly bought and sold. Free currencies refer to the currencies of developed countries. Partially convertible currencies have limited demand. Some forex


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