St. Joseph’s College of Commerce (Autonomous)

End Semester Examination- April 2011

MIB – II Semester

INTERNATIONAL FINANCIAL INSTITUTIONS AND MARKETS

Duration:  3 Hours                                                                                         Max. Marks: 100

Section – A

1. Answer ALL the questions in one or two sentences.                                (10×2=20)
2. Who are the major participants in a financial system?
3. What is a Mortgage Backed Security?
4. What is a European quote?
5. What is three- point arbitrage?
6. What is a certificate of deposit?
7. What is a junk bond?
8. What is Ginnae Mae?
9. What is CDO?
10. What is an ADR?
11. What is hedging?

Section – B

1. Answer any FOUR questions (4×5=20)

1. Suppose a company has issued 1975 lakh shares of which 900 shares are promoters’ holdings and its closing price on BSE on say May 10, 2009 was INR 350 per share. , The market capitalization on May 9^th 2009 was 354420 lakhs. The index value on the same day was 5620 points. How will the index on May 10^th be calculated? Explain the method employed to calculate the index.
2. Write a note on Exchange Traded Funds?

13. In London a dealer quotes:

GBP/CHF Spot 3.5250/55

GBP/JPY Spot 180.80/181.30

 

What do you expect the CHF/JPY rate to be in Geneva? Suppose that in Geneva you get a quote CHF/JPY Spot 51.1530/ 51.2550, is there an arbitrage opportunity?

 

14. What is a bond? Consider a INR 1000 par value bond, carrying a coupon rate of 9%, maturing after 8 years. The bond is currently selling for INR 800. What is the YTM on this bond?
15. Write a note on the role of IMF.

 

16. What are the alternatives for banks to grow their international operations in a phased manner?

 

Section – C

 

• Answer any THREE of the following questions.                   (3×15 = 45)

1. On 27th December 2008, Gitanjali Jewellers required State Bank of India to remit FFR 300,000 to France in payment of import of diamonds under an irrevocable LC. However due to the bank’s strike, State Bank of India could remit only on 4th January 2009. Interbank rates were as follows:

PLACE	27th December 2008	4th January 2009
Delhi                    (INR/USD) USD per INR 100	4.10/4.15	4.07/4.12
London               (GBP/USD)	2.7250/60	2.7175/85
Paris                     (GBP/FFR)	4.9575/90	4.9380/ 90

 

State Bank of India wishes to retain an exchange margin of 0.125%.  How much does Gitanjali Jewellers stand to gain or lose due to the delay?

1. What are the various methods of classification of Mutual Funds?
2. What are the different types of orders one may place while trading in shares?
3. What is a letter of credit? Explain its working in the light of it being a product offered by international banks.
4. Suppose Mr X wants to open a multiplex and is in need of funds for the same. To raise funds, Mr X can sell his future cash flows (cash flows arising from sale of movie tickets and food items in the future) in the form of securities to raise money. In the light of the above example explain the process of securitization.

Section – D

1. Case study – Compulsory Question.                                   (15 marks)

 

1. Mr Patil has retired after what can be called a very fulfilling career with a leading engineering company. His only daughter is married and well settled in Bangalore. He owns a large house in Thane — worth about INR 80 lakh (INR 8 million), but he has limited savings (including PPF and EPF) of INR 10 lakh (INR 1 million) to generate any major income. He is not expecting any pension either. His worry now is to pay for his modest monthly expenses of INR 20,000. The only option he had earlier was to rent his house and move to a smaller house himself or to sell his house altogether and invest the proceeds to earn a higher monthly income. Either way, in his old age, he will be forced to look around for accommodation and keep on worrying about the rising rents — not a very happy prospect.

Is there a better way out for him?

 

 

 

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