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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – OCTOBER 2013
B.B.M. – V SEMESTER
INTERNATIONAL FINANCE (ELECTIVE P-I – FINANCE)
Time: 3 hours Max Marks: 100
SECTION – A
I) Answer ANY TEN of the following. (10×2=20)
1. What is transaction exposure risk?
2 . What is Interest Swaps?
3. Distinguish between American quote and European quote.
4. What is Hedging?
5. What is Counter Party risk ?
6. Who is Put writer?
7. Why Initial Margin is given?
8. What is Arbitrage?
9. Does Mutual fund equal to hedge fund?
10. What is Bermuda option?
11. What is Maintenance margin?
12. What is the meaning of ‘Marking- to-Market’.
SECTION-B
II) Answer ANY FOUR of the following. (4 x 5 =20)
13. Indian would like to have travelers cheques: GBP-STERLING Rs.72.70-73.25
a) Explain the quote
b) Compute the spread
c) How much would you pay for purchasing 250 pounds?
d) If you have a balance of pounds 23 in travellers cheques , how many rupees
would you receive if the bank in India quotes 73.65-73.92?
14. Explain risks associated with derivatives.
15. Explain Carbon Credit with reference to derivative market.
16. Consider the following quotations in Indian market
Rupee/UAE Dirham (AED)=12.69
Rupee/Swedish Kroner (SEK)=5.49
Rupee/New Zealand Dollar (NZD)=25.35
Euro/INR=0.0198
Compute: a)The quote for SEK/AED b) Euro/NZD
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17. Explain the Purchasing Power Parity(PPP) theory.
18. Explain international capital budgeting.
SECTION – C
III) Answer ANY THREE of the following questions. (3×15=45)
19. The following are three quotes in three Forex markets
1$=Rs.48.3011 in Mumbai
1pound=Rs.77.1125 in London
1Pound=$1.6231 in New York.
Are there any arbitrage gains possible? Assume there are no transaction costs
and the arbitrageaur has $1,000,000.
20. Spot rate-78.10; forward rate for three months-Rs.77.50; rate of interest for pounds-
6% for three months. Rate of interest in India-5%. Is there any arbitrage ?
21. A Ltd is planning to import a multipurpose machine from Japan at a cost of 3400
lakh Yen.The company can borrow at the rate of 18% per annum with quarterly
rests. However there is an offer from Tokyo branch of Indian Bank extending credit
of 180 days at 2% per annum against the opening of an irrevocable letter of credit.
Other information is as follows:
♦ Spot rate for Rs.100=340 yen; 180 days forward rate for Rs.100=345 yen;
commission charges for letters of credit are at 2% for 12 months.
♦ Advise the company which mode of purchase is better?
22. Explain ADR and GDR and explain the risks in such instruments in the current
foreign currency fluctuation.
23. Explain: a) Expropriation risk
b) Incremental cash inflow with respect to multinational capital Budgeting.
SECTION-D
IV) Answer the following compulsory question. (1 x 15 =15)
24. Explain a) Relevant cost and relevant benfits in multinational capital budgeting
b) Opportunity cost
c) Translation exposure
d) Intangible Benefits to multinational capital investments
e) Cannibalisation
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