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DRIVE Spring 2017
PROGRAM MBA
SEMESTER IV
SUBJECT CODE &
NAME
MA0043/MBF 304
CORPORATE BANKING
1
Explain the Letters of Credit mechanism practiced in international banking.
Letters of
Credit mechanism in international banking
Answer: Letters of Credit Mechanism
Any business/industrial venture involves purchase transactions related
to machine/other capital goods and raw material etc., and also sale
transactions related to the products. The customer may, therefore, find
2
Compare and contrast financial and operating lease.
Financial and
operating lease
Answer: Financial Lease
One of the
fundamental features of a financial bank lease is a condition in accordance
with which the lesser agrees to transfer the title for the asset at the
completion of the lease period at a nominal cost. This kind of lease also gives
an option to the lessee to purchase the utilized asset when the lease period is
over. On the
3
How do the commercial banks evaluate term loan credit proposals ?
Evaluation of
term loan credit proposals by banks
Answer: A
banker basically assesses the viability and feasibility of a project on the
followingfour parameters:
(i)
An
(ii)
4 “Venture
capital is the leading source of finance that meets the needs of
start-upenterprises.” Explain the concept of venture capital and justify the
above statement.
Role of venture
capital to finance start up enterprises
Answer: Venture
capital (VC) is the leading source of finance to meet the requirements of new
entrepreneurs. Usually the return on investment varies, and such types of
financing aids in buy-outs, acquisition projects, joint ventures, start-up
projects, trade expansion projects, and even in business turnarounds. These
projects happen to be widely technological in approach. This kind of financing
is associated with high risk levels, where the investment proposal is based on
the
5
Explain the role of Hypothecation, Pledge, Assignment and Mortgage in corporate
finance.
Role of
Hypothecation, Pledge, Assignment and Mortgage in corporate finance
Answer: Hypothecation: As per Securitization
and Reconstruction of Financial Assets and Enforcement of Security Interest Act
of 2002 (Section 2n), hypothecation has been defined as ‘a charge in or upon
any movable property, existing or future, created by a borrower in favour of a
secured creditor without delivery of possession of the movable property to such
creditor, as security for
6
Explain some of the important exchange rate quotes in foreign exchange
transactions made by banks.
Important
exchange rate quotes in foreign exchange mechanism
Answer: Important exchange rate quotes
(i)
Spot and forward rates: The current exchange rate of a spot transaction is known as the ‘spot
rate’. In a spot transaction, the settlement is usually done within two
business days and such rates are called ‘forward rates’. The forward
transactions therefore involve a delivery date in the future, which may extend
even up to a year. As the
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(ii)
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