Seat No.: Enrolment No.
GUJARAT TECHNOLOGICAL UNIVERSITY
--- Content provided by FirstRanker.com ---
MBA — SEMESTER 3 - EXAMINATION - WINTER 2016
Subject Code: 2830502 Date: 04/01/2017
Subject Name: International Finance (IF)
Time: 02.30 PM TO 05.30 PM Total Marks: 70
Instructions:
--- Content provided by FirstRanker.com ---
- Attempt all questions.
- Make suitable assumptions wherever necessary.
- Figures to the right indicate full marks.
Q.1 (a) Answer the followings. 6
1. In direct quote, if the forward rate is less than spot rate, then the foreign currency is .......... And home currency is...........
--- Content provided by FirstRanker.com ---
A. Appreciating, Depreciating B. Depreciating, Appreciating
C. Appreciating, Constant D. None
2. The spot rate for INR/AUD is 29.45 and three month forward rate is 29.36, then % Depreciation of INR=......
A, 1.226% B. 1.365%
C. 1.056% D 1.222%
--- Content provided by FirstRanker.com ---
3. The spot rate for Rs is Rs50-52. And Forward rate is Rs53-56.
Swap (Bid)=....., Swap (Ask)= ....., Spot Spread= ...., Forward Spread=......
A, 3423 B. 3223
C. 3424 D. 3323
4. Interest Rate Parity Theory implies. ..
--- Content provided by FirstRanker.com ---
A. Highest interest rate in one country B. Highest interest rate in one country will be offset by appreciation of currency of that country
will be offset by depreciation of currency of that country
C. Highest inflation rate in one country D. Changes in anticipated inflation produce corresponding changes in the rate of interest.
will be offset by depreciation of currency of that country
5. Translation Risk refers to. .
--- Content provided by FirstRanker.com ---
A. Profit or loss’ “associated with B. Effect of changes in exchange rate between transaction date and settlement date may be adverse.
converting foreign currency denominated: -assets/liabilities into reporting.currency
C. Transaction exposure D. Unanticipated changes in exchange rate, which has impact on potential of organization to perform.
6. Find odd one out with reference to hedging tools
A. Forward Exchange Contract B. Money Market Hedge
--- Content provided by FirstRanker.com ---
C. Currency Futures and Option D. Caps, Floors and Collars
(b) Answer the following terms briefly 04
- Leading and Lagging
- Bilateral Netting and Multi lateral Netting.
- Cross Currency Roll Over
- Swap points
--- Content provided by FirstRanker.com ---
Q.2 a) Interest rate in Japan on 90 days government securities is 4%p.a.
a) If Interest Parity theory holds goods and if 3 months forward rate is 138 what is the implied interest rate in USA?
b) If the actual interest rate is 7% p.a in USA what action would follow?
--- Content provided by FirstRanker.com ---
Q.3 What action will follow if purchasing Power Theory does not hold good? 07
DK is a UK based exporter. It has invoiced $350000 to US Customer. 07
The money is receivable in three months. How can it insulate itself against exchange rate risk by doing money market hedge?
Exchange Rate in London are:
($/£) Spot 1.5865-1.5905
--- Content provided by FirstRanker.com ---
3 Months Forward 1.6100-1.6140
And following are the money market Rates.
| Deposit | Loans | |
|---|---|---|
| US$ | 7% | 9% |
| UK | 5% | 8% |
OR
The united States Dollar is selling in India at Rs45.50. If the interest rate 07
for six month borrowing in India is 8% p.a. and corresponding rate in USA is 2%,
--- Content provided by FirstRanker.com ---
i. Do you expect United State Dollar to be at discount or at discount in the Indian Forward Market
ii. What is expected 6 Month Forward Rate for United States Dollar in India?
iii. What is rate of forward premium/or discount?
Q.3 How does money market hedge operate? Discuss its salient features. 07
Q.4 You are finance manager of company, Your MD is asking to explain how 07
--- Content provided by FirstRanker.com ---
to take advantage of arbitrage gains possible on Rs. 10,00,000 from the middle rates given below. Assume there are no transaction costs-
Rs. 76.200 =£ 1 in London
Rs. 46.600 =$ 1 in Delhi
$ 1.5820 =£ 1 in New York
OR
--- Content provided by FirstRanker.com ---
Discuss the-scheme of ECGC. 07
Q.4 Soni Ltd:-and Toni Ltd. face the following interest rate: 07
| Soni Ltd. | Toni Ltd | |
|---|---|---|
| US Dollar (floating rate) | LIBOR + 0.25% | LIBOR +2.25% |
| Japanese Yen (fixed rate) | 1.75% | 2% |
Toni Itd wants to borrow US dollars at t floating rate of interest and Soni Ltd. wants to borrow Japanese yen at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 100 basis point spread. If the swap is equally attractive to Soni Ltd. and Toni Ltd. what rate of interest will they end up paying?
Q.5 Discuss the determinants of Forex rates. 07
An Indian importer has to settle an import bill for $ 1,30,000. The 07
--- Content provided by FirstRanker.com ---
exporter has given the Indian exporter two options:
(i) Pay after three months with interest @ 5% per annum.
The importer’s bank charges 15% per annum on overdrafts. The exchange rates in the market are as follows:
Spot rate (Rs./$) : 48.35/48.36
3-month forward rate (Rs. /$) 1 48.81/48.83
--- Content provided by FirstRanker.com ---
The importer seeks your advice. Give your advice.
OR
Explain the significance of LIBOR in international financial transactions. 07
Q.5 A London dealer quotes: 07
GBP/ USD Spot: 1.6428/35
--- Content provided by FirstRanker.com ---
GBP/JPY Spot: 191.80/ 191.95
What will be the USD/ JPY (Bid and Ask) rate in New York?
Q.5 Management of an Indian company is contemplating to import a machine 14
from USA at a cost of US$ 15,000 at today’s spot rate of $0,0227272 per Rupee. Finance manager opines that in the present foreign exchange market scenario, the exchange rate may shoot up by 10% after two months and accordingly he proposes to defer import of machine.
Management thinks that deferring import of machine will cause a loss of Rs. 50,000 to the company in the months.
--- Content provided by FirstRanker.com ---
As the Finance Manager of Company, you are asked to express your views, giving reasons, as to whether the company should go in for purchase of machine right now or defer purchase for two months.
OR
Sunshine Ltd. is engaged in the production of synthetic yarn and 14
planning to expand its operations. In this context, the company is planning to import a multipurpose machine from Japan at a cost of ¥ 2,460 lakh. The company is in a position to borrow funds to finance import at 12% interest per annum with-quarterly rests, India based Tokyo branch has also offered to extend credit of 90 days at 2% per annum against opening of an irrevocable letter of credit. Other information are as under:
- Present exchange rate :Rs. 100 =¥ 246
- 90 days forward rate :Rs. 100 =¥ 250
- Commission charges for letter of credit at 4% per 12 months.
--- Content provided by FirstRanker.com ---
Advise whether the offer from the foreign branch should be accepted.
--- Content provided by FirstRanker.com ---
This download link is referred from the post: GTU MBA Last 10 Years 2010-2020 Question Papers || Gujarat Technological University