Exam Details
| Subject | international finance | |
| Paper | ||
| Exam / Course | mba | |
| Department | ||
| Organization | Gujarat Technological University | |
| Position | ||
| Exam Date | May, 2017 | |
| City, State | gujarat, ahmedabad |
Question Paper
Page 1 of 3
Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER 03 • EXAMINATION SUMMER 2017
Subject Code: 2830502 Date: 11/05/2017
Subject Name: International Finance
Time: 02.30 PM TO 05.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q-1
a.
Answer the following MCQs
06
1.
India's foreign exchange rate system is?
A.
Free float
B. Managed float
C.
Fixed.
D. Fixed target of band
2.
The acronym SWIFT stands for
A.
Safety Width In Financial Transactions.
B. Society for Worldwide International Financial Telecommunication
C.
Society for Worldwide Interbank Financial Telecommunication
D. Swift Worldwide Information for Financial Transaction.
3.
If PPP holds
A.
The nominal exchange rate will not change.
B. The real exchange rate will not change.
C.
Both real and nominal exchange rates will not change.
D. Both real and nominal exchange will move together
4.
Hedging with options is best recommended for
A.
Hedging receivables.
B. Hedging payables.
C.
Hedging contingency exposures.
D. Hedging foreign currency loans
5.
A bank located usually in another country that provides service for another bank is
A.
Foreign bank
B. Central bank
C.
Correspondent bank
D. World bank
6.
INCOTERMS are devised and published by
A.
International Chamber of Commerce
B. World Bank
C.
World Trade Organization
D. United Nations
Q-1
b.
Explain the following terms
04
a. Price-specie-flow mechanism
b. Forward rate agreement
c. CIF
d. Bilateral Netting
Q-1
c.
What is Translation exposure?
04
Q-2
a.
What is the meaning of International Finance? How it differs from domestic
Finance?
07
b.
What is fixed and flexible exchange rate? How the external adjustment mechanism takes place in fixed and flexible rate? Explain
07
Page 2 of 3
OR
b.
Generally, balance of current account and balance of capital account are equal in amount but opposite in direction, but how it has been possible for China for several years to keep both of them positive? Explain with the help of BOP identity component.
07
Q-3
a.
Explain interest rate Parity. Discuss the implications of interest rate parity for exchange rate determination.
07
b.
Why International Portfolio Investment is Popular? Explain the Risk Reduction through International Diversification.
07
OR
Q-3
a.
Briefly explain various types of International banks
07
b.
What is Transaction exposure? How forward contract and option can be used to mitigate transaction exposure? Explain with example
07
Q-4
a.
Briefly define each of the major types of international bond market instruments, noting their distinguishing characteristics.
07
b.
What are the objectives of ECGC? Discuss the role of ECGC in the
promotion of exports.
07
OR
Q-4
a.
Role of EXIM in the development of Foreign Trade
07
b.
Explain different type of Letter of credit.
07
Q-5
a.
On 18th July, an export customer seeks forward cover for Euro 100000 with option to him over the month of September, covering an export bill on Frankfurt with 30 days usance.
The interbank rates for US dollar were as follows.
Spot
USD 1 Rs. 68.5200/ 68.5275
Spot
/July
500/600
/August
1500/1600
/September
2800/2900
/October
4200/4300
/November
6300/6400
/December
8500/8600
14
Euro is quoted in the Singapore Market as under:
Spot
Eur 1 USD 1.0600/1.0650
1 month
20/21
2 months
40/41
3 months
60/61
4 months
80/81
5 months
100/101
6 months
120/121
Transit period is 25 days. The bank requires an exchange margin of 0.10%
Calculate the rate to be quoted to the customers.
Q-5
a
You plan to visit United states, in three months to attend an international business conference. You expect to incur the total cost of USD 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is Rs. 67.73/USD and the three-month forward rate is Rs.71.12/USD. You can buy the three-month call option on USDs with the exercise rate of Rs.72.25/USD for the premium of Rs. 0.05 per USD. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 9 percent per annum in the India and 7 percent per annum in United States.
a. Calculate your expected Rupees of buying USD 5,000 if you choose to
14
Page 3 of 3
hedge via call option on USD.
b. Calculate the future Rupees cost of meeting this USD obligation if you decide to hedge using a forward contract.
c. What will be the cost in term of Rupees, if money market hedge is used?
Compare and comment on your answer
Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER 03 • EXAMINATION SUMMER 2017
Subject Code: 2830502 Date: 11/05/2017
Subject Name: International Finance
Time: 02.30 PM TO 05.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q-1
a.
Answer the following MCQs
06
1.
India's foreign exchange rate system is?
A.
Free float
B. Managed float
C.
Fixed.
D. Fixed target of band
2.
The acronym SWIFT stands for
A.
Safety Width In Financial Transactions.
B. Society for Worldwide International Financial Telecommunication
C.
Society for Worldwide Interbank Financial Telecommunication
D. Swift Worldwide Information for Financial Transaction.
3.
If PPP holds
A.
The nominal exchange rate will not change.
B. The real exchange rate will not change.
C.
Both real and nominal exchange rates will not change.
D. Both real and nominal exchange will move together
4.
Hedging with options is best recommended for
A.
Hedging receivables.
B. Hedging payables.
C.
Hedging contingency exposures.
D. Hedging foreign currency loans
5.
A bank located usually in another country that provides service for another bank is
A.
Foreign bank
B. Central bank
C.
Correspondent bank
D. World bank
6.
INCOTERMS are devised and published by
A.
International Chamber of Commerce
B. World Bank
C.
World Trade Organization
D. United Nations
Q-1
b.
Explain the following terms
04
a. Price-specie-flow mechanism
b. Forward rate agreement
c. CIF
d. Bilateral Netting
Q-1
c.
What is Translation exposure?
04
Q-2
a.
What is the meaning of International Finance? How it differs from domestic
Finance?
07
b.
What is fixed and flexible exchange rate? How the external adjustment mechanism takes place in fixed and flexible rate? Explain
07
Page 2 of 3
OR
b.
Generally, balance of current account and balance of capital account are equal in amount but opposite in direction, but how it has been possible for China for several years to keep both of them positive? Explain with the help of BOP identity component.
07
Q-3
a.
Explain interest rate Parity. Discuss the implications of interest rate parity for exchange rate determination.
07
b.
Why International Portfolio Investment is Popular? Explain the Risk Reduction through International Diversification.
07
OR
Q-3
a.
Briefly explain various types of International banks
07
b.
What is Transaction exposure? How forward contract and option can be used to mitigate transaction exposure? Explain with example
07
Q-4
a.
Briefly define each of the major types of international bond market instruments, noting their distinguishing characteristics.
07
b.
What are the objectives of ECGC? Discuss the role of ECGC in the
promotion of exports.
07
OR
Q-4
a.
Role of EXIM in the development of Foreign Trade
07
b.
Explain different type of Letter of credit.
07
Q-5
a.
On 18th July, an export customer seeks forward cover for Euro 100000 with option to him over the month of September, covering an export bill on Frankfurt with 30 days usance.
The interbank rates for US dollar were as follows.
Spot
USD 1 Rs. 68.5200/ 68.5275
Spot
/July
500/600
/August
1500/1600
/September
2800/2900
/October
4200/4300
/November
6300/6400
/December
8500/8600
14
Euro is quoted in the Singapore Market as under:
Spot
Eur 1 USD 1.0600/1.0650
1 month
20/21
2 months
40/41
3 months
60/61
4 months
80/81
5 months
100/101
6 months
120/121
Transit period is 25 days. The bank requires an exchange margin of 0.10%
Calculate the rate to be quoted to the customers.
Q-5
a
You plan to visit United states, in three months to attend an international business conference. You expect to incur the total cost of USD 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is Rs. 67.73/USD and the three-month forward rate is Rs.71.12/USD. You can buy the three-month call option on USDs with the exercise rate of Rs.72.25/USD for the premium of Rs. 0.05 per USD. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 9 percent per annum in the India and 7 percent per annum in United States.
a. Calculate your expected Rupees of buying USD 5,000 if you choose to
14
Page 3 of 3
hedge via call option on USD.
b. Calculate the future Rupees cost of meeting this USD obligation if you decide to hedge using a forward contract.
c. What will be the cost in term of Rupees, if money market hedge is used?
Compare and comment on your answer
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