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DRIVE summer 2017
PROGRAM MBA
SEMESTER III
SUBJECT CODE &
NAME
IB0010 & INTERNATIONAL FINANCIAL MANAGEMENT
1. Explain the
difference between International Financial Management and Domestic Financial
Management? Discuss the goals of international financial management?
Difference
between international financial management and domestic financial management.
Goals
of international financial management
Answer: Difference between international financial management and domestic
financial management
•
Foreign exchange risks: The foreign exchange
risks states the fluctuation or variation in the prices of currency which will
have a tendency to convert a profitable deal to a loss making one. This creates
a situation of additional risk to the finance manager.
•
Country
•
•
2. Explain the
advantages and disadvantages of fixed and floating rates systems? Discuss
foreign exchange transactions?
Explain
advantages and disadvantages of floating rate systems.
Meaning,
types
Answer: Advantages of fixed rates system
1. The system provides exchange rates stability by eliminating
uncertainty.
2. Volatility of exchange rate is controlled as it insulates the economy
from external disturbances.
3. Foreign investors are encouraged to invest in countries without the
fear of exchange rate fluctuations.
4. Poorer
3. Explain the concept
of Swap. Write down its features and various types of interest rate swap.
[Introduction
of Swap-2
Features
of swap-4
Various
types of interest rate swap-4]
Answer: Swap is an agreement
between two or more parties to exchange sets of cash flows over a period in
future. The parties that agree to swap are known as counter parties. It is a
combination of a purchase with a simultaneous sale for equal amount but
different dates. Swaps are used by corporate houses and banks as
4. Elaborate on
meaning of foreign exchange exposure. Explain the types of foreign exposure.
Meaning
of foreign exchange exposure
Explain
the types of foreign exposure
Answer: The foreign exchange exposure of a firm can be defined as a measure of
the sensitivity of its cash flows to changes in exchange rates. Due to the
difficulty of measuring cash flows, exposure is examined by most of the
researchers through the study of how a firm’s market value responds to the
changes
5. Write short notes
on:
International Credit
Markets
International Bond
Markets
[International
Credit Markets-5
International
Bond Markets-5]
Answer: a) International Credit Markets
International
credit markets are the forum where companies and governments can obtain credit
(loans in various forms) from the creditors/investors. These markets are an
important part of international capital markets. International capital market
is that financial market or world financial centre where shares, bonds,
debentures, currencies, mutual funds and other long term securities are
purchased and sold. These
6. Country risk is the
risk of investing in a country, where a change in the business environment
adversely affects the profit or the value of the assets in a specific country. Explain
the country risk factors and assessment of risk factors.
[Introduction
of country risk factors-5
Explanation
of assessment of risk factors-5]
Answer: Country Risk Factors
We
can define country risk as the risk of losing money due to changes that can occur
in a country’s government or regulatory environment. The most common examples
are acts of war, civil wars, terrorism and military coups, etc. It comes in
various forms: for example, change in the government of a country, a
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