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DRIVE SPRING 2016
PROGRAM MBA
SEMESTER IV
SUBJECT CODE &
NAME
MA0042/MA0047
TREASURY MANAGEMENT
1
“The Treasury organisation deals with analysing, planning and implementing
treasury functions” In the light of the quotation explain the concept of
treasury management in banks.
Different aspects
of Treasury organisation
Answer: Structure of treasury organisation
Ø Fiscal – This group
includes budget policy planning division, industrial and environmental
division, common wealth state relationships, and social policy division.
Ø Macroeconomic –
This group deals with economic sector of the organisation. It
2
“Highly rated corporate borrowers in India are permitted to issue unsecured
debt-notes to meet the need of their working capital”. In the light of this
statement cite two such popular instruments and explain their essential
features.
Answer: Debentures
are the long-term unsecured debt instruments which are not supported by
securities. These are issued essentially by corporate for the purpose of
raising funds and documented by an
3
Explain the features of ADRs and GDRs. Distinguish between Depository Receipts
and Participatory Notes. What is a Foreign Exchange Derivative?
ADRs and GDRs
Depository
Receipts and Participatory Notes
Foreign Exchange
Derivative
Answer: The following are the features of GDRs and
ADRs:
•
These are in the nature of a certificate or receipt issued by an international depository
bank outside the
4
Critically analyse the tools available for managing risks in a financial
institution.
Tools available
for managing risks
Answer: Tools available for managing risks
The risk
management tools forecasts the analysis and implementation of various methods
in order to mitigate risks. It includes several systems and models that enhance
correlation of risks and
5
What are the assumptions in preparation of gap report in terms of assets,
liabilities as well as off balance sheet items?
Assumptions to
prepare gap report in terms of Assets, Liabilities and off balance sheet items
Answer: Assumptions in preparation of gap report
in terms of assets, liabilities and off balance sheet items
Assets
Assets are
nothing but any item of economic value owned by an individual or corporation.
6
Write notes on:
a)
Gap limit
b)
Stop Loss Limit
c)
Value at Risk Approach
Answer: a) Individual
Gap Limit and Aggregate Gap Limit
The
limits on gap risks are:
• Individual
gap limit: Determines the maximum mismatch for any calendar month;
currency-wise.
• Aggregate
gap limit: Is the limit fixed for all gaps, for a currency, irrespective of
their being long or short. This is computed by adding the absolute values of
all overbought and all oversold positions for the various months, i.e. the
total of the individual gaps, ignoring the signs. This limit is also
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