Seat No.:
Subject Code: 3539225
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Enrolment No.
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA - SEMESTER- III EXAMINATION - WINTER 2019
Subject Name: International Finance
Time: 10:30 AM TO 1.30 PM
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Date: 07-12-2019
Total Marks: 70
Instructions:
- Attempt all questions.
- Make suitable assumptions wherever necessary.
- Figures to the right indicate full marks.
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Q.1 Explain the following: 14
- Gresham’s Law
- SDR
- Bid Ask Spread
- Types of exchange rates quotations.
- Purchasing Power Parity
- American Depository Receipts
- Arbitrage
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Q.2 (a) Explain how a country can run an overall balance of payments deficit or 07 surplus. Why would it be useful to examine a country’s balance of payments data?
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(b) Discuss the implications of the interest rate parity for the exchange rate 07 determination.
OR
(b) What do you mean by Forward Contract? Describe its major benefits 07
Q.3 (a) What are multinational corporations (MNCs) and what economic roles do they 07 play?
(b) The current spot exchange rate is $1.55/£ and the three-month forward rate is 07 $1.50/£. Based on your analysis of the exchange rate, you are pretty confident that the spot exchange rate will be $1.52/£ in three months. Assume that you would like to buy or sell £1,000,000.
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- What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation?
- What would be your speculative profit in dollar terms if the spot exchange rate actually turns out to be $1.46/£.
OR
Q.3 (a) Explain any two F Group of Inco terms. 07
(b) Suppose that the current spot exchange rate is €1.06/$ and the three-month 07 forward exchange rate is €1.02/$. The three-month interest rate is 5.6 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1,000,000 or €1,060,000.
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Show how to realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars.
Q.4 (a) Briefly discuss the various types of international banking offices. 07
(b) Explain the mechanism of letter of credit with the help of an example. 07
OR
Explain the benefits of Letter of Credit to Importers as well as exporters
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Q5 CASE STUDY: 07
EFFICIENT FUNDS FLOW AT EASTERN TRADING COMPANY
Q5 (a) The Eastern Trading Company of Singapore purchases spices in bulk from 07 around the world, packages them into consumer-size quantities, and sells them through sales affiliates in Hong Kong, the United Kingdom, and the United States. For a recent month, the following payments matrix of interaffiliate cash flows, stated in Singapore dollars, was forecasted.
Eastern Trading Company Payments Matrix (S$000)
Disbursements
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| Receipts | Singapore | Hong Kong | U.K. | U.S. | Total Receipts |
|---|---|---|---|---|---|
| Singapore | - | 40 | 75 | 55 | 170 |
| Hong Kong | 8 | - | - | 22 | 30 |
| U.K. | 15 | - | - | 17 | 32 |
| U.S. | 11 | 25 | 9 | - | 45 |
| Total disbursements | 34 | 65 | 84 | 94 | 277 |
(b) Show how Eastern Trading can use multilateral netting to minimize the foreign 07 exchange transactions necessary to settle interaffiliate payments.
(b) Explain in detail the concept of ‘transfer pricing in International Cash 07 Management
Descibe the Bretton Woods regime. Explain the role of WTO in International 07 trade.
Explain the role of Export Import Bank of India in promoting International 07 trade
OR
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