BU MBA Last 10 Years 2010-2020 Previous Question Papers || Bangalore University (1st, 2nd, 3rd & 4th Sem)
IV Semester M.B.A. Degree Examination, July 2018
(CBCS Scheme)
MANAGEMENT
4.2.2/4.6.2: International Financial Management
Time: 3 Hours
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PG-607
Max. Marks: 70
SECTION-A (5x5=25)
Answer any five of the following questions. Each question carries five marks.
- Write a short note on the evolution of International Monetary System.
- What is 'Balance of Payments'? Explain its relationship with the different economic variables.
- Explain Interest Rate Parity Theory and International Fisher Effect.
- The following quotes are available:
Spot (DM/S) 1.5105/1.5120
Three-month swap points 25/20
Six-month swap points 30/25--- Content provided by FirstRanker.com ---
Calculate the three-month and six-month outright forward rates. - A Bank sold Hong Kong Dollars 40,00,000 value spot to its customer at Rs. 7.15 and covered itself in London market on the same day, when exchange rates were:
US$ = HK$ 7.9250-7.9290
Local interbank market rates for US$ were
Spot US$1 Rs. 55.00-55.20--- Content provided by FirstRanker.com ---
You are required to calculate rate and ascertain the gain or loss in the transaction. Ignore brokerage. You have to show the calculations for exchange rate up to four decimal points. - If the present rate for 6 months borrowings in India is 9% per annum and the corresponding rate in USA is 2% per annum and the US$ is selling at Rs. 64.50/$, then
i) Will US$ be at a premium or at a discount in the Indian Forward Market?
ii) Find out the expected 6 month forward rate for US$ in India.
iii) Find out the rate of forward premium/discount. - Following information is available in respect of a put option on £:
Strike price $ 1.50/£
Option premium $0.04 per £
Spot rate on strike date $ 1.40/£
Find the pay off of the buyer and seller of the put option given that one option contract cover 10000 units of £.
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SECTION -B (3×10=30)
Answer any three questions. Each question carries ten marks.
- What is Foreign Exchange Risk? State and explain the various types of Foreign Exchange Risk with examples. Briefly explain the 'internal techniques' for Mitigating Transaction Risk.
- Companies A and B have the following interest rates :
A wants to borrow US Dollars at a floating rate of interest and B wants to borrow Canadian dollars at a fixed rate of interest.A B US Dollars (floating rate) LIBOR + 0.5% LIBOR + 1% Canadian (fixed rate) 5.0% 6.5%
A financial institution is planning to arrange a swap and requires a 50 basis point spread. If the swap is equally attractive to A and B, what rates of interest will A and B end up paying? - Explain ADR's and GDR's as tool/instrument of financial investments in Foreign Market.
- Indus Ltd. is the wholly owned Indian subsidiary of US based company, Gofts Ltd. non-consolidated Balance Sheets of both Gofts Ltd. and Indus Ltd., (only foreign operations), in thousands, are as follows :
Plant and equipment and common stock were acquired when exchange rate was Rs. 38.20/$.Assets Gofts Ltd. Indus Ltd. (Affiliate) Cash $2,200 Rs. 8,000 Accounts receivable 2,400 4,600 Inventory 2,400 7,000 Net plant and equipment 4,600 9,000 Investment 2,000 Total $13,600 Rs. 28,600
The current exchange rate is Rs. 43.20/$. Gofts Ltd. translates by current rate method.Liabilities and Net Worth Gofts Ltd. (parent) Indus Ltd. (Affiliate) Accounts payable $1,000 Rs. 12,000 Common stock 4,000 6,000 Retained earnings 8,600 10,600 Total $13,600 Rs. 28,600
a) Calculate the accounting exposure for Gofts Ltd. by the current rate method and monetary/non-monetary method.--- Content provided by FirstRanker.com ---
b) Prepare a consolidated Balance Sheet for Gofts Ltd. and Indus Ltd.
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SECTION-C (1x15=15)
This is a compulsory question carrying fifteen marks :
- Case study:
ABC Ltd., a US firm, will need £ 5,00,000 in 180 days. In this connection, the following information is available:
Spot Rate 1 £ = $ 2.00--- Content provided by FirstRanker.com ---
180 days forward rate of £ as of today is $ 1.96.
Interest rates are as follows:
A call option on £ expires in 180 days has an exercise price of $ 1.97 and a premium of $ 0.04.U.S. U.K. 180 days deposit rate 5.0% 4.5% 180 days borrowing rate 5.5% 5.0%
ABC Ltd., has forecasted the spot rates for 180 days as below :
Which of the following strategies would be most preferable to George Ltd. ?Future Rate ($) Probability 1.91 30% 1.95 50% 2.05 20% --- Content provided by FirstRanker.com ---
a) A forward contract
b) A money market hedge
c) An option contract
d) No hedging option.
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