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DRIVE-Winter
2015
PROGRAM-Bachelor
of Business Administration- BBA
SEMESTER-6
SUBJECT
CODE & NAME-BBA603 & ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS
BK
ID-B1905
CREDIT
& MARKS-4 Credits, 60 marks
Q1.
State the various challenges faced by a multinational corporation in trying to manage
the currency exposure in various currencies.
Answer:
challenges faced by a multinational corporation:
Political
Problems
Political
risks take many shapes. They may come in the form of policy actions from
national governments, such as regulatory or nationalization programs, and they
can have adverse effects on your objectives and bottom line. The host country
may get involved in a war or experience civil strife or revolution, leading to
detrimental political decisions such as laws preventing capital
Q2.
Compare the relationship between Current Account, Capital Account and Official
Reserve Account. Explain the concept of BoP Accounting
Answer:
Relationship
between Current Account, Capital Account and
Official
Reserve Account
A country needs to adopt
different practices of finance in its current account deficit to handle the
contingencies in her trade. The major contingencies, however,
Q3.
Give introduction on foreign exchange. Explain on foreign exchange markets and
role of international forex markets.
(Introduction
on foreign exchange, Explanation on foreign exchange markets, Role of
international forex markets) 2, 4, 4
Answer.
Foreign exchange
Foreign Exchange (FX)
refers to money denominated in the currency of another country or a group of
countries. Any short-term negotiable financial claims or cash, funds available
on debit cards and credit cards, travelers’ cheques and bank
Q4.
Explain the Foreign Direct Investment (FDI). Give the comparison between
American Depository Receipt (ADR) and Global Depository Receipt (GDR). Write
the categories for trade blocs.
(Explanation
of FDI, Comparison between ADR & GDR, Introduction on trade blocs) 4, 4, 2
Answer.
Foreign Direct Investment (FDI)
Foreign Direct
Investment (FDI) is a direct investment route through which a foreign company
invests in a target company of a host country. This can be done by setting up a
subsidiary company in the overseas company or by acquiring shares in it. This
route is a major source of foreign exchange reserve for a country and helps to
bridge the deficits in balance of trade. It
Q5.
Write down the differences between GATT and WTO. Explain the problems and
achievements of GATT & WTO.
(Differences
of GATT and WTO, Explanation of problems of GATT & WTO, Explanation of
achievements of GATT & WTO) 5, 3, 2
Answer.
Differences of GATT and WTO
GATT was replaced by
‘amended GATT’, i.e. WTO on 1 January, 1995. WTO is just not an extension of
GATT but is different in many ways. Let us study the differences below:
|
GATT
|
WTO
|
Q6.
Explain cash-in-advance and write the process of issuing letter of credit and
different types of letter of credit.
(Explanation
of cash-in-advance, Process of issuing of letter of credit, Explanation of
types of letter of credit) 2, 3, 5
Answer.
Cash-in-advance
In this type of
payment method, the payment is received before the ownership of the goods is
transferred; hence the credit risk is avoided by the exporter. This type of
arrangement is most risky for the buyer and least risky for the seller. The
most frequently cash-in-advance options available to the exporter are credit
cards and wire transfers. This type of
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