Download BU (Bangalore University) MBA 4th Semester 2016 July International Financial Management Question Paper

Download BU (Bangalore University) MBA (Master of Business Administration) 4th Semester 2016 July International Financial Management Question Paper

|llllllll||||llllllllllllllllllllll PG ? 932
IV Semester MBA. Degree Examination, July 2016
' , ,(CBCS)
MANAGEMENT
' 4.2.2/4.6.2 : Internatiohal Financial Management
Time : 3 Hours Max. Marks :70
SECTION ?-A
Answerany five of the following questions. Each question carries five marks. (5x5=25)
1. Explain the importance International credit and finaneial markets.
2. Distinguish between forwards and futures.
3.
4. Explain the different types of accounts maintained under balance of payments
Explain purchasing power parity theory and international fisher effect.
with its components.
XYZ Ltd. is an Indian affiliate of US sports manufacturer. It manufacture items
which has sold primarily in US and UK. XYZ Balance Sheet in 000' of Rs. as on
31St March 2015 follows :
Assets V Amt Liabilities Amt. '
(000? Rs.) (000? Rs.)
Cash 8,000 Accounts Payable 4,500
Accounts Receivable 6,500 Short term bank loan 3,500
Inventory 5,500 LOng term loan 6,000
Net plant and equipment 20,000 Capital and Stock 20,000
, ' Retained Earnings 6,000
Total 40,000 Total 40,000
The exchange rate on 1St April 2014 is Rs. 70/$ and 31 5? March 2015 is Rs. 77/$.
Determine the accounting exposure and accounting gain or loss under monetary
and non-monetary method. ?
P.T.O.

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6. The buying rate for Indian rupee spot in Newyork is 0.94 $. What would you
expect the price of US $ to be in Mumbai, if the $ were quoted in Mumbai at Rs. 84.
How is the market suppose to react ? On the same date that the Rs. Spot was
quoted $ 0. 94 in Newyork, the price of the Pound sterling was quoted $ 1.80.
i) What would you expect the price of the pound to be' In India.
ii) If the pound were quoted? In Mumbai at Rs. 937pound what would you do to
profit from the situation ?
7. You have called your foreign exchange trader and asked for quotations on the spot
one, three and six months. The trader has responded with the following:
35 0.6284/85, 3/7, 9/8, 12/10.
i) What does this mean in terms of $ per Euro ?
ii) If you wished to buy spot Euros how much would you pay in $ ?
iii) If you wanted to purchase spot US$ how much would you have to pay in Euro ?
iv) What is the premium or discount in the one, three and six months tonNard
rates in annual % (assume you are buying Euros).
SECTION ? B
Answer any three of the following questions. Each question carries ten marks.
(3x10=30)
8. Describe the importance of International monetary system and stages of evolution.
9. a) On October 29th you have bought Decemberfutures on GBP on the price of
$1.445. The contractxsize is ? 62,500. The initial margin is?5% for the next 3
days, the closing price of are 35 1.4490, 35 1.4460 and :15 1.4410. Determine the
mark to margin profit or loss for the above 3 days and the balance in the
. margin No.
b) If exchange rate at the end of 2014-15 is Fls. $ 43.91/US $ and if the rate of
inflation in India and USA during 2015-16 is respectively 7 percent and 4
percent. Find :
i) Inflation rate differential between the two countries and
ii) The exchange rate at the end of 2015-1 6.

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,10_ Discuss the evolution of European 'monetary system and its trends in the
11.
12.
international money market.
An UK importer imports goodsfworth of US $ 5,000 from USA and he has to
rhake payment after 90 days. The importing firm is expecting changes in the ?
exchange rate and it thinks about selling a particular alternative. Spot rate? 0.8/$,
90 days forward rate is .3 0.75/$,. interest rates on borrowing in UK and USA is
5% p.a., Interest rate on deposits /investments is 4% p.a. in 90 days call option
is having a strike price of ? 0.6 pounds at a premium of? 0.05/$. In 90 days put
option is having exercise price ? 0.65 and a premium of ? 0.05/$. Spot rate on
90th day is ? O.78/$. Determine the hedging strategies and best option to the
importer.
SECTION ? C
Compulsory case 'study. . _ (1 x15=1 5)
- . The currency exchange rates and currency interest rates are as follows 2
1-Year Canadian dollar (C$) Spot rate $ 0.85/C$
1-Year Canadian dollar (C$) Forward rate $ 0.86/C$
1-Year Canadian dollar (C$) Interest rate 5.5%
1-Year US Interest rate 7.5%
In what direction will interest arbitrage force the quoted rates to change ? Explain
the steps and compute the profit based on a $ 1 million initial position.