# Download GTU MBA 2019 Winter 3rd Sem 3539225 International Finance Question Paper

Download GTU (Gujarat Technological University) MBA 2019 Winter 3rd Sem 3539225 International Finance Previous Question Paper

Page 1 of 2

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER ? III EXAMINATION ? WINTER 2019
Subject Code: 3539225 Date:07-12-2019

Subject Name: International Finance

Time: 10:30 AM TO 1.30 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 Explain the following:
(a) Gresham?s Law
(b) SDR
(d) Types of exchange rates quotations.
(f) American Depository Receipts
(g) Arbitrage

14
Q.2 (a) Explain how a country can run an overall balance of payments deficit or
surplus. Why would it be useful to examine a country?s balance of payments
data?
07
(b) Discuss the implications of the interest rate parity for the exchange rate
determination.
07

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
play?
07
(b) The current spot exchange rate is \$1.55/? and the three-month forward rate is
\$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.
a. What actions do you need to take to speculate in the forward market? What
is the expected dollar profit from speculation?
b. What would be your speculative profit in dollar terms if the spot exchange
rate actually turns out to be \$1.46/?.
07
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
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.

Show how to realize a certain profit via covered interest arbitrage, assuming
that you want to realize profit in terms of U.S. dollars. .
07

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
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Page 1 of 2

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER ? III EXAMINATION ? WINTER 2019
Subject Code: 3539225 Date:07-12-2019

Subject Name: International Finance

Time: 10:30 AM TO 1.30 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 Explain the following:
(a) Gresham?s Law
(b) SDR
(d) Types of exchange rates quotations.
(f) American Depository Receipts
(g) Arbitrage

14
Q.2 (a) Explain how a country can run an overall balance of payments deficit or
surplus. Why would it be useful to examine a country?s balance of payments
data?
07
(b) Discuss the implications of the interest rate parity for the exchange rate
determination.
07

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
play?
07
(b) The current spot exchange rate is \$1.55/? and the three-month forward rate is
\$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.
a. What actions do you need to take to speculate in the forward market? What
is the expected dollar profit from speculation?
b. What would be your speculative profit in dollar terms if the spot exchange
rate actually turns out to be \$1.46/?.
07
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
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.

Show how to realize a certain profit via covered interest arbitrage, assuming
that you want to realize profit in terms of U.S. dollars. .
07

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
Page 2 of 2

Q.4 (a) Briefly define each of the major types of international bond market
instruments, noting their distinguishing characteristics.
07
(b) Explain the benefits of Letter of Credit to Importers as well as exporters 07
Q.5

CASE STUDY:
EFFICIENT FUNDS FLOW AT EASTERN TRADING COMPANY

The Eastern Trading Company of Singapore purchases spices in bulk from
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

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

(a) Show how Eastern Trading can use multilateral netting to minimize the foreign
exchange transactions necessary to settle interaffiliate payments.
07
(b) Explain in detail the concept of transfer pricing in International Cash
Management
07
OR
Q.5 (a) Descibe the Bretten Woods regime. Explain the role of WTO in International